On 27 February 2024, the FCA announced a consultation on proposed amendments to its existing enforcement policy. These include proposals to publish announcements and updates about enforcement investigations before they have concluded, including naming the relevant firms, where it considers that such announcements and updates are in the public interest.
The FCA’s proposals follow (public) observations that it has slowed down its fining activity in recent years, with total fines of only £52.8m in 2023, a fraction of the fines imposed in 2022 (£215.8m) and 2021 (£576.9m). In this climate, the FCA’s proposals may represent not only a desire to be seen to be active through all of its work, not just concluded fines in the coffers - but also to move away from focusing on fine-based deterrence, to deterrence centred more around industry impact. The FCA’s Therese Chambers said as much in her speech on 27 February 2024: “Enforcement is not just about the prison sentences, fines and censures. It is about communicating what our plan is and deterring bad behaviour”.
Whatever their ultimate purpose, these proposals are unlikely to be welcomed by investigation subjects, who will doubtless have common concerns around the potentially far-reaching and multi-faceted impacts of such publicity.
The remainder of this post summarises: (1) the proposed amendments; (2) the proposed factors for announcement; and (3) next steps.
The proposed amendments
At the moment, the FCA rarely, and certainly not routinely, comments on individual enforcement investigations.
The FCA now proposes, however, publicly to:
- announce the opening of enforcement investigations, including: (1) the identity of the subject of investigations (but not usually individuals); (2) the sector and regulatory or legal provisions to which investigations relate; and (3) a summary of the suspected breach, failing or other misconduct being investigated, and publish updates on such investigations; and
- announce and publish updates on investigations that have already started – in other words, firms that are currently in an enforcement process could, under the proposals, be identified when this policy comes into effect,
in each case, if the FCA considers that it is in the public interest to do so.
If the FCA has announced the opening of an investigation and subsequently closes it without regulatory, civil or criminal action, it proposes either to publish an announcement, and/or to amend the original announcement on its website, to that effect.
The FCA further proposes that a named subject will “normally” – but not necessarily – be given advance notice of such an announcement or update, but of “no more than 1 business day”.
The proposed factors for announcement
The FCA proposes that public interest will be assessed by reference to a new framework, which it will apply to the fact, content and timing of each proposed announcement or update, on a case-by-case basis.
The framework is proposed to include a number of non-exhaustive factors:
- Factors that indicate publicity will be in the public interest. For example, the announcement/update: (1) enables the protection of consumer/investor interests; (2) helps the investigation (for example by encouraging potential witnesses or whistleblowers to come forward); (3) addresses public concern, speculation or incorrect information; (4) provides reassurance that the FCA is taking appropriate action; (5) deters future breaches; or (6) otherwise advances the FCA’s statutory objectives.
- Factors that indicate publicity will not be in the public interest. For example, the announcement/update may have an adverse impact on: (1) the conduct of the/another investigation; (2) consumer interests; or (3) the stability of the UK financial system or the FCA’s ability to otherwise carry out its statutory functions. It does not appear that the FCA proposes that it should be deterred from announcement/update by potential market sensitivity, though it will attempt to balance openness with ensuring that announcements/updates are “orderly”.
The FCA expressly says that, while it acknowledges that this “more transparent approach” may raise concerns about potential impact on investigation subjects, it has not included this as a factor in the decision to publish, because it is primarily concerned with promoting its statutory objectives, and disclosure should support investigations, and increase the FCA’s accountability by providing public reassurance. It proposes that announcements would, however, where appropriate state that an investigation opening should not be taken to mean that the FCA has come to any conclusion that there has been a breach or other misconduct or failing, nor determined what resulting enforcement action, if any, is appropriate. This suggests that the FCA does not have any corresponding plan to change (or clarify) the thresholds for opening its investigations.
Next steps
The FCA’s proposals are outlined in its Consultation Paper CP24/2. The paper includes at its Annex the proposed text for a new Enforcement Guide (EG), which includes the publicity proposals, as well as other amendments to update/better organise/clarify etc. the FCA’s broader enforcement policy.
Consultation responses are due – in 6 weeks, rather than the often-seen 3 months – by 16 April 2024, following which the FCA will move to publish its final policy.
Interested parties would therefore be well-advised to scrutinise the detail of the FCA’s proposals, both in relation to publicity (see section 3 of the consultation paper, and the proposed new EG 4 (Publicity) at the Annex to the paper), and the broader changes to EG (see section 4, and the Annex generally), and consider whether they wish to respond, as soon as possible.
