Chair of the Financial Conduct Authority, Ashley Alder, said the regulator was not expecting the criticism it has received on proposals to 'name and shame' firms under investigation.
Appearing in front of the Treasury committee, Alder alongside Nikhil Rathi, chief executive of the FCA, spoke about the regulator’s ‘name and shame proposals’.
Under the new enforcement proposals, the FCA will decide whether to name firms at the outset, giving these firms 24 hours' notice, with the decision based on various metrics driven by public interest factors, such as whether it will draw out whistleblowers or protect consumers.
Alder said: “After the board meeting we held when the consultation paper for these proposals was discussed, we found it was valid and legitimate to go out with a consultation on this.”
He also felt the rationale underlying the paper, which was to look at factors to do with deterrence, whistleblowing, as well as "the potential for speculation and rumour around cases", meant it was suitable for consultation.
In terms of reaction to the proposals, Alder admitted: “In truth at the time the proposals were put out, we were not expecting such a stern reaction from the industry.”
Chair of the committee, Harriett Baldwin, pointed out the FCA already has the power to name firms under exceptional circumstances in the public interest.
However Rathi believed these powers would not work in a number of cases and used the British Steel Pension Scheme as an example.
Rathi said: “The FCA had information about problematic financial advisers who were being investigated.
"The steelworker pensioners were not aware we were investigating and they were calling our contact centre and being told the firm they were asking about was on the FCA register and no further information was disclosed.
“They then took advice and potentially lost their life savings. And that was the point that the public accounts committee asked us to look into, in this context, whether there was more we could say in those circumstances.”
Rathi felt the exceptional circumstances powers the FCA has would not have worked in the British Steel case because “sadly investment fraud is not exceptional".
No decision made
In a letter published today (May 8) Rathi wrote to Baldwin saying: “The FCA no longer consider that our current approach of a presumption against disclosure of the fact of an investigation other than in exceptional circumstances adequately serves our primary statutory objectives or supports an appropriate degree of transparency and accountability, including to parliament.”
Rathi also said the FCA considers that “clean markets with more effective enforcement of proportionate regulation” supports competitiveness of the UK economy and financial services industry.
Rathi confirmed to the committee it would take “several months” before the FCA released its decision following the consultation, with Alder stating “no decision” had been made yet.
“At the moment there is no presumption to disclose or name firms.
