FCA to Re-Evaluate “Naming and Shaming” Proposal After Backlash

The UK’s Financial Conduct Authority (FCA) is reassessing its proposal to publicly name companies under investigation before formal charges, due to backlash from lawmakers and industry figures concerned about potential reputational damage and impacts on the UK’s financial sector competitiveness.

The “naming and shaming” proposal aimed to enhance transparency, deter wrongdoing, and encourage whistleblowers. However, critics argue publicly naming companies early in investigations could lead to unjustified reputational damage, especially if no wrongdoing is found.

During a Treasury Committee session, FCA Chair Ashley Alder acknowledged the “stern reaction” and reassured lawmakers the FCA will take the feedback seriously. FCA Chief Executive Nikhil Rathi confirmed a thorough review of consultation responses before deciding on a course of action.

Industry groups have been vocal in their opposition, highlighting the potential for false accusations to tarnish companies and deter investment in the UK. Concerns also exist about the impact on smaller firms, which might be particularly vulnerable to negative publicity.

The FCA is committed to maintaining high standards but also recognizes the need to balance enforcement powers with fairness. The coming months will be crucial in determining how the FCA will refine its approach.

Additional Information:

• The FCA can currently name firms under investigation in exceptional circumstances, but the proposed change would have made it more routine.
• The consultation on the proposal closed in April, with the FCA’s final policy expected later this year.
• Lawmakers have questioned the sufficiency of the FCA’s current enforcement tools and whether “naming and shaming” is the most effective deterrent.

Source: Reuters