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The UK Financial Conduct Authority is planning to name firms under investigation more frequently and at a much earlier stage in an effort to increase the deterrence effect such probes can have on the market.
The new approach, outlined in a consultation paper set to be published on Tuesday, would mainly apply to firms rather than individuals due to legal constraints around privacy, the FCA said.
“More transparency around our enforcement work at an earlier stage is going to enable firms to start putting their houses in order where they need to at an earlier date than they’re currently able,” Therese Chambers, joint executive director of enforcement and market oversight, told the Financial Times.
The FCA has historically published very little about its investigations until they are resolved through penalties such as fines or criminal charges, only commenting in “exceptional circumstances”, said Chambers, who took up her role last April.
Under the new approach, the regulator would adopt a looser “public interest” test in the hope that naming entities under investigation would encourage witnesses and whistleblowers to come forward.
Enforcement action from the agency has been lacking in recent years. In 2023, the FCA issued just eight fines, the lowest since the agency was created a decade ago.
Earlier this month, the FCA secured its first insider trading conviction since 2019. The FCA has blamed some of the downturn in enforcement activity on the Covid-19 pandemic and the court backlog that created.
The FCA is responsible for bringing civil and criminal actions against the individuals and firms it regulates in the financial services industry. Other agencies such as the UK Serious Fraud Office have a broader remit to prosecute any major white collar crimes.
Under Mark Steward, head of enforcement at the FCA between 2015 and 2023, the agency took a less outcomes-focused attitude to investigations. Steward said early on in his tenure that probes should be an “open-minded exploration of an issue”.
About 65 per cent of the FCA’s investigations currently close without action, according to Steve Smart, co-head of enforcement, who joined the regulator in June from the National Crime Agency.
Smart and Chambers are also reviewing the agency’s approach to whistleblowers, including how the agency incentivises people with information to come forward.
The pair will be speaking to the Serious Fraud Office about the issue in the coming weeks, after the new SFO director Nick Ephgrave said this month he would like to pay whistleblowers for information, a common practice in the US.
“I am very happy that we look again at incentivisation,” said Smart. “We’ll talk to the SFO as to what they’re thinking is and where they’re looking to go on it, and then come to make a decision.”
