Clifford Chance

The FCA has indicated that it will not proceed with its proposal to routinely name regulated firms that are the subjects of enforcement investigations.

What was the FCA's "name and shame" proposal?

In February 2024, the FCA (in its Consultation Paper CP24/2 - "Our Enforcement Guide and publicising enforcement investigations – a new approach"), proposed to publicly name regulated firms under enforcement investigations at an early stage, before any findings of misconduct had been made. This would have involved a fundamental shift in approach. Where previously the FCA's policy was to name firms under investigation in "exceptional circumstances", instead it would have decided whether to publicise these details based on the application of a "public interest test". The stated aim of this proposal was to enhance transparency and to increase (and bring forward to an earlier stage of the enforcement process) the educational and deterrent impact of action against firms.

We summarised the details of these proposals and the rationale for them in our previous briefing in March 2024.

What was the reaction to the FCA's proposal?

The FCA's proposal prompted serious concerns about fairness, consistency of decision making and disproportionate reputational damage. This led to some proposed adjustments to the criteria for deciding whether to name firms and the process for doing so. These were explained in the FCA's letter to the Treasury Select Committee dated 27 November 2024.

These adjustments did little to assuage continuing concerns voiced during the second phase of the FCA's consultation, which ran until 17 February 2025. Acknowledging this ground swell of opinion against the proposals, in a letter to the Treasury Select Committee dated 11 March 2025, the FCA has now confirmed that it no longer intends to proceed with the proposal, at least in relation to "regulated firms carrying out authorised activities".

What will happen next?

The FCA has indicated that it intends to continue to engage actively with stakeholders before publishing a final policy statement by the end of June, alongside an updated copy of its Enforcement Guide.

It does not appear that every aspect of the proposed changes will be abandoned. In his letter to the Treasury Select Committee on 11 March 2025, Nikhil Rathi, the FCA's CEO noted "broad support and much less concern" about:

1. reactively confirming investigations which are officially announced by others, typically market announcements by listed firms, other disclosures made by firms themselves or sometimes announcements by a partner regulator;
2. public notifications which focus on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter, where doing so protects consumers or furthers the investigation; and
3. publishing greater detail of issues under investigation on an anonymous basis, perhaps via a regular bulletin such as Enforcement Watch.

Commentary

Confirmation that the FCA will maintain the status quo in respect of many investigations by releasing details at an early stage only in "exceptional circumstances" has been widely welcomed.

For the firms described in Mr Rathi's letter to the Treasury Select Committee as "regulated firms carrying out authorised activities", this will mean that the FCA will continue to be permitted under its Enforcement Guide (EG 6.1.3) to announce an investigation where "desirable" to (1) maintain public confidence in the financial system or the market; (2) protect consumers or investors; (3) prevent widespread malpractice; (4) help the investigation itself, for example by bringing forward witnesses; or (5) maintain the smooth operation of the market. In deciding whether to make an announcement the FCA has to consider the potential prejudice to the subject of investigation.

The FCA has historically only rarely publicised any information about investigations it has opened, unless and until it results in actual or proposed outcomes such as censures or penalties, as its interpretation of "exceptional circumstances" has been restrictive. The Final Notice issued by the FCA this week to the London Metal Exchange is a case in point. The FCA (applying its previous approach) decided that the specific circumstances of that case justified publicising its investigation in that case in March 2023. This was previously an unusual occurrence. However, even with the concessions now confirmed by the FCA, it is likely that numbers of published cases will rise. These concessions are not as broad as they may appear and there remains scope for considerable variation in how the FCA will approach the question of whether to publicise investigations at an early stage.

Further detail will follow on how exactly the FCA will construe "regulated firms carrying out authorised activities"(and as such which of the higher "exceptional circumstances" or the lower "public interest test" thresholds will apply).Additional clarity will be welcomed on specific questions such as whether the FCA considers that "regulated firms" in this context includes listed companies or authorised firms subject to investigation for alleged conduct not characterised as breaches of Handbook provisions (for example in relation to money laundering or market abuse). Particular questions may arise for the FCA in investigations which are, or may be, pursued as concurrent "dual track" criminal and regulatory investigations. In these cases, even if releasing details of the investigation concerning alleged breaches of regulatory requirements may be deemed to be in the public interest, the potential for prejudice in any linked criminal proceedings may mean that the FCA considers itself constrained from doing so.

Similarly, there may be scope for ambiguity and variation in approaches in cases where the same conduct may involve alleged infringement of Handbook provisions by regulated firms and other regulatory requirements by associated unregulated firms. For example, the approach that will be taken to concurrent investigations concerning suspected systems and controls breaches by regulated entities and possible breaches of the Listing Rules by their listed parent companies is not yet clear.  

Conclusion

The FCA's decision to abandon its controversial "name and shame" proposal marks a significant shift in its approach to enforcement transparency. By retaining the "exceptional circumstances" test for many investigations, the FCA has sought to protect firms from undue reputational harm while still using publicity for educational and deterrent purposes in some cases.

Attention will now turn to how the FCA's policy shift is to be reflected in the Enforcement Guide. Firms should continue to actively engage in this process to provide maximum transparency and predictability about the extent and timing of publication of details of enforcement investigations.