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Britainâ€s financial regulator has said it will “fundamentally reshape†its plan to “name and shame†more of the companies it investigates after the proposals provoked a big backlash in the City of London.
Nikhil Rathi, chief executive of the Financial Conduct Authority, said it would present revised proposals “in the next week or so†before making a final decision early next year.
The FCA announced in February it planned to name more companies under investigation and at a much earlier stage in an effort to increase the deterrence effect of its probes.
Speaking to a House of Lords committee on Wednesday, Rathi said: “This is not a case of us opening up the entire book of investigations — that was never our intention.â€
The FCA chief admitted there were “things we could have done differently†when the proposals were announced, such as giving the usual public notification beforehand, communicating them better and adjusting the plans themselves.
Rathi said the revised plan would include giving companies at least 10 days†notice before disclosing they were being investigated, instead of only one day as initially proposed.Â
The regulator would also introduce a more stringent public interest test to raise the bar on when it would seek to publicly disclose the targets of its investigations, he said.
The FCA said it already had the power to name the companies it was investigating in exceptional circumstances, adding: “If we do this in two or three more cases of regulated firms a year, then we are not talking about a big change.â€
There were also cases where the regulator wanted more freedom to announce that it was not investigating a company over a particular issue, Rathi said.
Nathan Willmott, a partner at law firm Ashurst, said many in the City suspected that the regulatorâ€s new approach was designed “to convey to the media and to politicians that it is an active and aggressive regulator†by pushing companies to agree to an early settlement of its investigations.
But he added: “It seems that the FCA is now heavily underplaying what it believed the effect of the proposals would be.â€
Members of the House of Lords financial services regulation committee called for the regulator to provide a full cost-benefit analysis of the changes — but Rathi only agreed to provide more detail on the “potential benefitsâ€.
Two-thirds of FCA investigations in the past have ended without any enforcement action, raising concerns that it could damage the reputation of companies by disclosing their identity even if the probe ended up not finding any wrongdoing.
Many of the FCAâ€s investigations are into unregulated companies, for which Rathi said naming them was “relatively uncontroversialâ€, as these often involved fraud or scamming that risked serious harm to consumers.
Out of its 47 open investigations into regulated companies, he said their identity was already public in 27 cases. The FCAâ€s plan would mean disclosing the identity of five more companies that were the subjects of seven of the remaining probes, he added.
The FCA has previously come under pressure from MPs to be more transparent about its enforcement work, including a call two years ago from the House of Commons public accounts committee as part of its investigation into the British Steel workers†pensions mis-selling scandal.
Ashley Alder, FCA chair, said the changes were aimed at preventing more harm being done to consumers while the FCA continued its investigation in such cases as the British Steel pension scandal.
He said the new approach would mean it moved from disclosing the name of companies being investigated “very rarely†to “sometimes†and certainly not in “most casesâ€.
