On 22 April 2024, the House of Lords Financial Services Regulation Committee published a letter to Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), regarding the FCA’s Consultation Paper CP24/2 on its approach to publicising enforcement decisions.

The FCA published CP24/2 on 27 February 2024 and is seeking feedback on its proposals by 30 April 2024. For more information on the proposals, please see our recent briefing.

In its letter, the Committee raises concerns that:

  • The FCA’s proposals risk having a disproportionate effect on firms named in investigations, where those firms are subsequently cleared of any wrongdoing, particularly given the length of many investigations.
  • This also risks the overall integrity of the market, including through possible unwarranted impacts on share prices for example.
  • Individuals, whether named or not, may have their reputations unfairly tarnished through association with a publicised investigation.

The Committee notes that the severity of these impacts will depend on the length of time before a firm or individual is exonerated, where that is the outcome.

The letter also questions the FCA’s decision not to carry out a cost-benefit analysis in relation to the proposals in CP24/2. In the absence of a cost-benefit analysis, the Committee suggests that it would be helpful, both for it and the wider financial services community, to be provided with answers to various questions, listed in the letter. These include questions on the FCA’s enforcement investigations including in relation to volume, timeframe and outcomes; the rationale for the proposals; whether the FCA has considered likely impacts on firms, regulators and the industry more generally; and how the proposals compare with approaches taken by other supervisors internationally.

The Committee asks the FCA to respond to these questions by 25 April 2024. It also requests that no further steps are taken to implement the proposed changes until the Committee has had the opportunity to take evidence on the proposals and to reach a final conclusion.