"We will amplify the deterrent impact of our work by enabling firms to understand the types of serious failings that can lead to an investigation"
- Therese Chambers, joint executive director of enforcement and market oversight
The FCA has announced changes to the way it carries out enforcement cases in order to streamline the process and "increase the deterrent impact of its enforcement actions".
In the future the FCA says it will "focus on a streamlined portfolio of cases", where it can deliver the greatest impact, and aims to "close those cases where no outcome is achievable, more quickly".
As part of the new approach the FCA has launched a consultation on plans to be more transparent when an enforcement investigation is opened, including publishing updates on investigations where appropriate and being open about when cases have been closed with no enforcement outcome.
The moves are a step change from the current process where investigations are only announced in very limited circumstances.
The FCA says any decision to announce an investigation would be taken on a case-by-case basis and depend on a variety of factors which will indicate whether to do so is in the public interest. These include whether the announcement will protect and enhance the integrity of the UK financial system, reassure the public the FCA is taking appropriate action, or assist in any investigations.
Announcing an investigation does not mean that the FCA has decided whether there has been misconduct or breaches of its requirements. Investigations into individuals will be different and the FCA will not usually announce these types of investigations.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: "By being more transparent when we open and close cases we can enhance public confidence by showing that we are on the case.
"At the same time, we will amplify the deterrent impact of our work by enabling firms to understand the types of serious failings that can lead to an investigation, helping them to change their own behaviour more quickly. Greater transparency will also drive greater accountability for us as an enforcement agency."
Steve Smart, joint executive director of enforcement and market oversight, added: "Reducing and preventing serious harm is a cornerstone of our strategy. By delivering faster, targeted and transparent enforcement, we will reduce harm and deter others. We will also make greater use of our intervention powers to stop harm in real time."
However, one industry trade body raised serious concerns about the impact of making public announcements of potential enforcement action against firms, given the potential market harm it could cause.
Alexandra Roberts, head of regulatory policy and compliance at PIMFA, commented: “It is not immediately clear to us how public announcements of potential enforcement action will support the FCA’s approach to supervision and enforcement – it seems unlikely to us that being ‘named and shamed’ publicly would be the primary deterrent for a firm committed to introducing harm into the market.
“More broadly, very real consideration needs to be given to what the potential impact will be on firms that are publicly subject to enforcement action. These announcements will lead to significant outflows for small firms in particular, rendering their businesses hollow shells of what they were previously, whilst larger listed firms will almost certainly be subject to significant shareholder volatility.
“The FCA's caveat that an investigation does not automatically mean that there has been misconduct, or breaches of their requirements, simply will not register with the wider public and the market. If the FCA is committed to doing this – and we would urge them to really consider if they should – they need to give very real consideration to where the bar for a public announcement is set and who really benefits from a public announcement.”
