UK lawmakers call on FCA to abandon ‘name & shameʼ plan

The UK Financial Conduct Authority (FCA) should not move forward with plans to identify firms under investigation by its enforcement division, an influential group of lawmakers said today.

The regulator had “not made a convincing case”, said the cross-party House of Lords Financial Services Regulation Committee in its report published on February 6, “Naming and shaming: how not to regulate”, which expressed concerns about the risk of reputational damage.

A key reason for the initial proposals was to reduce consumer harm but the committee said it was unclear as to why the regulator could not name a firm under its existing “exceptional circumstance” power if there was an immediate risk to consumers.

“It was incumbent on the FCA to make a strong and unequivocal case for why such a fundamental change was needed and it has failed to do that. Its consultation on the changes has been an abject failure and even the FCA chairman acknowledged this has not been the FCA’s finest hour,” said select committee chair Lord Forsyth of Drumlean.

Unnecessary damage

In November 2024, FCA chair Ashley Alder admitted the regulator could have better handled its proposals and it subsequently revised its plans later that month. Revisions included a commitment to consider the negative impacts on a firm of being named, and allowing it 10 daysʼ notice before any announcement was made regarding investigation. However, the committee was not persuaded these were sufficient.

Forsyth said: “The FCA told us that the average duration of investigations is around three to four years, and in 56 per cent of cases no further action was taken. If it presses ahead with its proposals on past performance it could mean that half of the firms it investigates, and the people involved in them, will have their reputations unnecessarily and unfairly damaged. This is not acceptable.”

The FCA has said it is reducing the number of firms it investigates and has cut the time to complete investigations to 16 months. Around 60% of its enforcement investigations were already in the public domain, it said, and that under the revised rules it expected to name only an additional one or two.

The committee commended the FCA for cutting the duration of enforcement investigations, and suggested the regulator focuses its efforts on reducing this time further.

An FCA spokesperson welcomed the committee’s “recognition that our efforts to increase the pace of investigations are working”.

Cost-benefit analysis

The committee has also called for the FCA to change its policy on cost-benefit analysis (CAB). The FCA had declined to fulfil an April 2024 request from the committee for a CAB, saying it was only required if rules and guidance were being changed, which did not apply in this case.

Commenting on the report, an FCA spokesperson said: “We proposed being more transparent about our enforcement investigations to improve accountability, public confidence and information for consumers and firms.

“We should have handled the initial consultation better, for example, by engaging on the proposals in advance. As the committee acknowledges, we took the feedback on board. We engaged extensively with the industry and revised our proposals.” It added it would “carefully consider” the committee’s report alongside the responses it receives to the November consultation on the revised proposals, which closes on February 17.