Previously, firms under FCA investigation would not be named until it had decided to take action.
Now, however, the regulator has a new power that allows it to publicise warning notices about a firm and, in some cases, an individual, prior to taking enforcement action.
It will consider each case based on individual circumstances and consult the person under investigation, taking into account any evidence that publication would be unfair.
Ultimately, however, a firm or individual could be named when it is under FCA investigation pending enforcement action. But is this fair to those involved?
The case for
A key argument for publishing details ahead of enforcement links to consumer protection: the sooner they know that a firm is under investigation, the better.
“The process to issue enforcements can take a terribly long time, and during that time, the firm could still be getting more people through the door,” says Claire Walsh, IFA at Brighton-based Pavilion Financial Services. Although the FCA would already be quite far down the road of censuring somebody if it has published a warning notice, it would still reduce the time that consumers would be unaware.
There is also a case that the potential for being named and shamed should act as a deterrent to those acting inappropriately, although the effect of this cannot be guaranteed.
Ms Walsh further argues that bad practice in financial services has damaged the industry’s reputation and action that can help to restore faith in the industry is a good thing.
“These people bring our industry into disrepute, contribute to increased costs for levies and PI and presently there seems little reproach,” she says.
The case against
Tony Catt, a freelance compliance officer, points out that the case becomes more complicated if the regulator published too early.
“The FCA already publishes enforcement notices, this is just one step further,” he says.
“The only issue would be if the FCA were too early publishing before their case research is complete. If they are incorrect, the damage to the individual/firm could be serious and I wonder what recourse there would be in place for naming incorrectly or that the firm defends its position and the allegations are incorrect.”
Mike Horseman, managing director at Nottingham-based Cockburn Lucas, says that surely individuals are innocent until proven guilty.
“While I have no problem with anyone being named and shamed after being found guilty of professional misconduct, I think it’s wise to tread carefully in this area and create a spirit of cooperation rather than fear,” he says.
The FCA has this power and has discretion over how it will use it. There is a strong case for consumer protection by naming firms or individuals in advance if the case against them is clear. The key concern is that this power should not be used unless the regulator is absolutely certain, or significant reputational damage could be caused.