(Bloomberg) -- The UK financial regulator said it will soften its plan to “name and shame” companies it’s investigating, giving firms 10 days to object before probes are made public.
The Financial Conduct Authority said on Thursday it will also consider whether announcing investigations sooner could “seriously disrupt public confidence” in the financial system or market. Only a small number of extra investigations will be publicized each year, it added.
The regulator has rowed back some of its initial plans unveiled earlier this year after a backlash from politicians and the finance industry. The FCA wants to publicize investigations at an earlier stage to encourage witnesses to come forward and to improve transparency and deterrence. Unlike watchdogs in other sectors such as energy, the FCA normally only identifies those under scrutiny once it has completed its investigation and decided to impose a penalty.
The FCA received 133 responses to its proposals, and lobby groups including TheCityUK made public statements about the risk to the country’s reputation as a global financial hub.
“Our proposals came as a surprise and we should have introduced them in a better way,” the FCA said in its latest consultation paper. “The essence of what we were proposing — of seeking to serve the public interest more effectively in a relatively small number of cases — became obscured.”
TheCityUK, a lobby group, said there had been some movement from the regulator but little change in other key areas, and no cost-benefit analysis. “Ultimately, the FCA’s approach would leave the UK as a global outlier,” said Chief Executive Officer Miles Celic, adding that the group would continue to engage with the regulator.
Former Chancellor Jeremy Hunt criticized the original version of the FCA’s changes, making a rare intervention against the regulator to warn of the risks to market integrity and the possibly disproportionate effect on companies’ shares. He said the original plan could have contradicted the regulator’s new secondary goal to support the UK economy — a priority that new Chancellor Rachel Reeves has also emphasized in recent speeches.
“We have heard the strength of feedback to our original proposals, and we are making changes as a result,” Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said in a statement.
“The moves allay a significant amount of the concerns, but they are still going to announce more investigations, they have not changed the substance,” said Imogen Makin, a white collar crime lawyer at WilmerHale in London. “In my view they are going to go ahead with this.”
The Managed Funds Association warned that the approach could still cause reputational harm to asset managers, even if an investigation subsequently concludes there was no wrongdoing.
Lobby group UK Finance welcomed the move on Thursday. “We support the FCA’s aim of being more transparent in this area, but we did have concerns about the original proposed approach,” Chief Executive Officer David Postings said in a statement.
--With assistance from Laura Noonan.
(Adds comments from eighth paragraph.)
©2024 Bloomberg L.P.