UK FCA drops 'name and shame' proposals for regulated firms

The UK Financial Conduct Authority (FCA) has announced its decision to drop its controversial proposals published last year to name firms it is investigating at an early stage and before any findings of misconduct have been made (the 'Transparency Proposal' – sometimes referred to as 'name and shame'). This follows a process of extensive consultation and engagement during which the industry, Government ministers and many Parliamentarians made clear that there were significant concerns with the Transparency Proposal and it should not proceed in the form proposed by the FCA. We set out our views on the original CP24/2 consultation, and Part 2 of the consultation, in previous posts.  Inevitably, some questions remain about the detail of their revised approach to 'transparency' in relation to enforcement investigations and we outline these below, but the FCA is to be commended for listening to the concerns raised by the industry, Government and other stakeholders.

The wider context

This decision has been made in the wider context of the Government's economic growth agenda, with the regulators' secondary international growth and competitiveness objective increasingly prioritised by the regulators in their decision making. The title of our HSF Global FSR Outlook for 2025 is Perpetual Motion, and the last 24 hours have shown it to be very apt. As well as confirmation that the FCA has dropped the most contentious part of its Transparency Proposal, announcements have been made regarding the merger of the Payment Systems Regulator (PSR) with the FCA, a delay in the FCA's non-financial misconduct guidance (to June 2025), and that the Prudential Regulation Authority and FCA won't be taking forward the diversity and inclusion (D&I) proposals they consulted on in 2023. 

Summary of the announcement – The Transparency Proposal

In summary, the FCA has announced that:

• the 'exceptional circumstances' test will remain for regulated firms;
• the FCA will reactively confirm investigations already in the public domain; 
• there will be a different approach in relation to potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter; and
• the FCA will publish more detail of issues under investigation on an anonymous basis.

We note that this largely reflects the approach we advocated to the FCA, including in our consultation response to CP24/2 Part 2.  

Questions that remain

As ever, the devil will be in the detail, and the following questions remain:

• what 'exceptional circumstances' will mean going forward – presumably moving away from the restrictive interpretation purported to be taken historically by the FCA, which required something to be exceptional within the remit of the FCA's enforcement portfolio;
• what it means for an investigation to be in the 'public domain' and what form a reactive confirmation will take; and
• what information might genuinely be useful to the industry in an 'Enforcement Watch' type publication, in the spirit of providing greater transparency. 

We'll look to continue to engage with industry, key stakeholders and the FCA.