AIMA reacts to FCA’s “name and shame” proposal

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The UK’s Financial Conduct Authority (FCA) is proposing to publish details of enforcement investigations firms and individuals before the cases are finished.

Today, AIMA has filed its response to the proposal outlining serious concerns.

In response to the FCA’s proposal, AIMA CEO Jack Inglis said:

“The FCA’s proposal to name firms and individuals at the start of an enforcement investigation instead of at the end is very concerning given almost two-thirds of such investigations result in no action. The FCA already has a well-equipped toolbox to make strong signals to the market about compliance issues without doing the kind of damage to reputations and businesses that the publication of such sensitive information is likely to cause. The FCA claims that this is a transparency exercise, but the amount of discretion it will have under the proposed regime could result in selective and subjective disclosure, which undermines the stated policy objective.”

The Financial Conduct Authority’s consultation paper CP 24/2 risks damaging innocent firms and individuals’ reputations and make the UK a less attractive domicile to do business in.

AIMA has a range of concerns over the proposal to publish the fact of an enforcement case when it is opened instead of waiting for it to be concluded as it does now.

In summary:

  • The FCA has a range of existing tools that can be used or enhanced to make any signals to the market;
  • The proposals will undermine open dialogue between the FCA and firms;
  • The proposed notification period of one day or less is unreasonable;
  • The proposals warrant a cost-benefit analysis;
  • The proposals do not align with the FCA’s confidentiality requirements;
  • The FCA has not considered privacy and human rights concerns adequately;
  • The FCA has not referred to or learned from relevant past experiences;
  • The proposals risk causing irreparable reputational damage to firms and individuals;
  • The proposed FCA announcements risk being perceived as statements of public censure;
  • Investors may be harmed if notification leads to pressure on redemptions in an investment fund or other types of investment-linked product;
  • The proposals are inconsistent with domestic and international financial services regulation;
  • The proposals mark a divergence from international norms and the practice of other regulators and will undermine UK international competitiveness – an FCA secondary objective;
  • The proposed drafting of the public framework is overly broad and so risks being capable of subjective and conflicting interpretation; and
  • Smaller firms would suffer more from the FCA’s proposed approach to publicising investigation updates, outcomes and closures due to the limited resources available to cope with such an event.