Some 16 trade associations have asked chancellor Jeremy Hunt to intervene over the FCA's 'name and shame' proposals, saying they would "have an unduly negative impact on the reputation on firms".
The organisations, including Pimfa and the City of London Corporation, said in a letter that the regulator's plans would put UK financial services at a serious disadvantage compared to its rivals and the FCA should find other means for achieving its transparency and efficiency goals.
The letter, seen by FT Adviser, stated: "At present there is no other G7 country that currently takes the approach on enforcement, that the FCA is proposing.
"This would have real and tangible consequences as investors are likely to be dissuaded from considering the UK in future, diminishing our attractiveness to business."
The letter added the proposals have raised particular concern at executive level, including at American-headquartered firms, which given there was no equivalent situation in the US, would put the UK at a distinct disadvantage.
The signatories were responding to CP24/2, Our Enforcement Guide and publicising enforcement investigations–a new approach, which focuses on identifying firms at the outset of an investigation, using a 'public interest' framework.
It is rare that the industry has been able to come together so comprehensively in opposition to a proposal.Under current rules, publicity over naming firms happens at a later stage, when the FCA is about to publish a warning notice, and enters into a discussion with the said firm, which can put its case and argue against naming it in the document.
Under the new proposals, the FCA will decide whether to name firms at the outset, giving these firms 24 hours' notice, and the decision will be based on various metrics driven by public interest factors, such as whether it will draw out whistleblowers or protecting consumers.
The letter added: "The FCA highlights that UK regulators covering other sectors publicly announce when investigations are taking place. However, the intense international competition that the financial services sector faces, and the fact that it is already heavily regulated, needs to be taken into account.
"Ofcom's approach is still under consultation and Ofgem is the price regulator of a monopoly occupied by a small number of firms (and even then does not announce all its investigations). The comparison is therefore unfair and misleading."
In conclusion the letter said: "We should like to highlight that it is rare that the industry has been able to come together so comprehensively in opposition to a proposal."
Kickback from industry
Last week the House of Lords Financial Services Regulation Committee wrote to FCA chief executive Nikhil Rathi asking him to pause the consultation, as it feared the proposals could risk the integrity of the financial services sector.
In response, the FCA wrote back at the end of last week saying: "We have seen no public statements by firms... that our investigation caused them a material permanent commercial impact, for example through net loss of clients not returning following closure of the investigation."
"We would, under our proposals, consider all relevant factors when weighing up whether or how an investigation interacts with the public interest test and... will additionally consider likely impact on the relevant firm and senior individuals."
In response to the letter from the trade associations, the FCA said: "We are consulting on proposals help promote transparency about our enforcement work bringing confidence to both markets and consumers and improving accountability.
"The plans sit within a wider range of work which is designed to ensure that any enforcement action we take is timely, focused and delivers impactful deterrence.
"We welcome all feedback and will continue our engagement with the industry, government, parliamentary committees and other stakeholders, even after the formal consultation has closed to ensure we are striking the right balance on these important issues."
Bim Afolami, economic secretary to the Treasury said: "This is a matter for the FCA, who have led this work independently of HM Treasury. However, we are engaging with both the FCA and industry as the proposals are developed, in particular to ensure that any potential impacts on competitiveness are properly considered.”
Liz Field, chief executive of Pimfa, one of the letter's signatories, said: “It is very difficult to see how the FCA’s proposals to publicise enforcement investigations will be of benefit to either consumer confidence and trust in financial services or to the integrity of the market overall.
“The FCA’s argument that an enforcement investigation does not automatically mean that there has been misconduct or breaches of its requirements seem to us to show a degree of naivety around the way the real-world works.
"An announcement of an investigation will lead many to believe there is no smoke without fire and assume guilt on the part of the firm being investigated, particularly if this is fuelled by press speculation."
The consultation closes tomorrow (April 30).
melanie.tringham@ft.com
