The U.K.'s financial watchdog has dropped plans to name and shame firms it is investigating at an early stage amid a “lack of consensus” for its proposal.
The Financial Conduct Authority said last year that it was considering naming the firms that fall under its purview — including asset managers and hedge funds — that were under investigation. It proposed telling the market that its investigations were opened and in progress, making public who or what is being scrutinized if it is deemed to be in the public interest — thereby moving to a "public interest test” from its existing “exceptional circumstances test.”
The proposal was met with criticism and concern from industry players — something the FCA acknowledged in an announcement on March 12.
However, the FCA is enhancing the pace of its investigations and making some changes following extensive engagement with the industry, confirming that there is support for "reactively confirming investigations already in the public domain; public notifications which focus on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter; and publishing greater detail of issues under investigation on an anonymous basis.” The FCA will publish its final policy by the end of June.
“Considerable concerns remain about our proposal to change the way we publicize investigations into regulated firms, so we will stick to publicizing in exceptional circumstances as we do today,” Nikhil Rathi, CEO of the FCA, said in the announcement. “We will implement changes which have commanded wider support and which we believe will help support our efforts to protect consumers from harm."
The Alternative Investment Management Association’s CEO Jack Inglis welcomed the move.
“It shows they have accepted the serious concerns that have been widely expressed, including those of AIMA members,” he said in an emailed comment. “The original proposals would have placed the U.K. at a competitive disadvantage to its international peers, and we are pleased that FCA has understood and that firms now have greater confidence that their businesses will not be compromised by unwarranted ‘naming and shaming’ if ever subject to an investigation.”
The FCA also said in a joint update with the Prudential Regulation Authority, which oversees banks, insurers and other entities, that it would also not pursue proposed rules and expectations aimed at improving diversity and inclusion in regulated firms.
“In light of the broad range of feedback received, expected legislative developments and to avoid additional burdens on firms at this time, the FCA and PRA have no plans to take the work further.”
The regulators had consulted on proposals to introduce a new regulatory framework on diversity and inclusion for the financial sector, publishing a set of proposals in 2023.
“We consider that greater levels of diversity and inclusion can improve outcomes for markets and consumers,” the FCA said at the time. “In particular, by helping reduce groupthink, supporting healthy work cultures, improving understanding of and provision for diverse consumer needs and unlocking diverse talent, supporting the competitiveness of the U.K.’s financial services sector. We have been clear that diversity and inclusion are regulatory concerns. Despite progress, research shows there is more to be done to improve diversity and inclusion in the financial sector.”
The FCA and PRA proposed minimum standards for the industry, which would also help to ensure greater consistency and transparency across the sector when it comes to approaches to diversity and inclusion, they said.
