The Financial Conduct Authority has vowed to carry out enforcement cases at a quicker pace and be more transparent when an investigation is opened. AS part of this it also intends to publish updates on investigations ‘as appropriate’ , a move that raises “serious concerns” adviser trade body PIMFA says.
The City watchdog said the move was part of its drive to increase the deterrent impact of its enforcement actions.
In the future, the FCA will focus on a streamlined portfolio of cases, aligned to its strategic priorities where it can deliver the greatest impact. It will also close cases where no outcome is achievable, more quickly.
In addition, the regulator said it has begun a consultation on plans to be more transparent when an enforcement investigation is opened. Under the plans, it will publish updates on investigations as appropriate and be open about when cases have been closed with no enforcement action.
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 enforcement and market oversight, said reducing and preventing serious harm is the “cornerstone” of the FCA’s 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,” he said.
The FCA cautioned that any decision to announce an investigation would be taken on a case-by-case basis and depend on a variety of factors which will determine 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.
However, wealth management trade association PIMFA said the FCA’s decision to make public possible enforcement against firms raises “serious concerns.”
Alexandra Roberts, head of regulatory policy and compliance at PIMFA, said: “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.”
Roberts said the FCA’s caveat that an investigation does not automatically mean that there has been misconduct or breaches of their requirements will not “register” with the wider public and the market.
She added: “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.”
