FCA surprised by stern reaction to name and shame proposals Mortgage Strategy

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The Financial Conduct Authority was surprised at the “stern reaction” to its plan to ‘name and shame’ companies under investigation — but will take “several months” before deciding whether to press ahead with the move.  

“In truth, we weren’t expecting such a stern reaction that has come from the industry,” said FCA chair Ashley Alder, speaking to the Treasury Committee yesterday.  

The meeting comes after the Chancellor and a range of City bodies called on the regulator to scrap the plan, saying the measure could hit the valuations of firms and “destabilise financial markets”.    

However, Alder said the move aims to boost transparency, encourage whistleblowing and increase the deterrent effect of the watchdog’s probes, which on average last three to four years.  

Other UK regulators — such as those in competition, water and energy — often name firms that are under investigation before deciding on whether they have breached any rules.    

However, this measure is rarely used by international financial services regulators such as the US Securities and Exchange Commission and Germany’s BaFin.    

But FCA chief executive Nikhil Rathi told the Treasury Committee that the regulator will take “several months” to decide whether to move ahead with its plan after talks with the financial services industry, consumer groups and whistleblowing campaign bodies.  

Rathi said the body has stepped up investigations into 27 listed, regulated and unregulated firms in the current financial year.  

He added that in one case it has been talking to an unnamed firm for three years, and during that time the company has released a statement confirming that it is under investigation in a number of overseas markets.   

A number of overseas regulators have already opened public probes into this business, Rahti added.  

The FCA chief executive said: “This firm has several million UK customers. This is the kind of case where we might want to confirm that an investigation is underway.”  

He added: “We will take our time over this proposal to make sure we get it right.”  

Rathi told the Treasury Committee that of the 27 cases he mentioned the watchdog might want to publicise the probes of three further firms.  

The FCA chief executive said that the watchdog already has the power to name firms under investigation but only under “exceptional circumstances”.  

The move by the regulator comes after it and the Prudential Regulation Authority were given new competitiveness and growth objectives by ministers last year.      

But last week, in a rare intervention in regulatory affairs, Chancellor Hunt said: “Last year the law changed in the financial services market and [the FCA] have a secondary growth duty.     

“On the basis of that, I hope they re-look at their ‘naming and shaming’ decision because it doesn’t feel consistent with that new secondary growth duty that they have.”    

It also emerged last week that 16 finance trade bodies — including UK Finance, The Investment Association and TheCityUK — wrote to the Chancellor asking him to intervene.    

“Firms believe that the proposals will have a negative impact on their valuation, could put at risk the wellbeing of individuals, and have the potential to destabilise financial markets,” the associations said in the letter to the Chancellor.    


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