FCA surprised by criticism over ‘name and shame’ proposal, says chair

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The boss of the UK’s financial regulator has admitted the watchdog is surprised by the strength of criticism directed at its proposal to more regularly “name and shame” companies that are under investigation. 

Ashley Alder, chair of the Financial Conduct Authority, said on Wednesday that “no decision has been made” on how to follow through with the proposal, which has drawn criticism from the UK’s financial and legal sectors and chancellor Jeremy Hunt. 

“In truth, I think we weren’t, at the time we put this [consultation] out, expecting such a stern reaction from the industry,” Alder told the House of Commons Treasury committee when asked about the decision to press ahead with the proposal.

Aimed at improving transparency and deterring wrongdoing, the proposal would allow the watchdog to move from naming firms under investigation in “exceptional” circumstances to a looser “public interest” test. 

Alder’s comments came as City minister Bim Afolami defended the right of the government to question the FCA’s actions.

“Ultimately regulators are only there by acts of government or acts of parliament, or both,” Afolami told the Financial Times’s Crypto and Digital Assets Summit on Wednesday. “It’s really important that we accept that regulators operate under the umbrella that parliament has set.”

Afolami’s remarks come after Hunt warned the FCA last week against its plan to name companies under investigation more frequently, before any finding of wrongdoing, urging it to “re-look” at its decision.

Executives have claimed it undermines the principle that firms should be deemed “innocent until proven guilty” and fear it will harm the City.

The proposal comes less than a year after ministers gave the FCA a new secondary objective to facilitate the UK’s economic growth and international competitiveness. 

Asked whether the chancellor’s intervention risked politicising the watchdog or undermining the UK’s reputation for regulatory stability, Afolami said: “No, I don’t think that’s a danger.

“It is perfectly legitimate for the chancellor, or indeed anybody else, to say: ‘In this instance, we’d like you to think again,’” he said, adding that it was important not to “prejudge” the FCA’s work to adapt to its new secondary objective.

Alder told MPs that there would be “no presumption to disclose or to name” companies under investigation under the proposed regime.

Bim Afolami speaking at the FT’s Crypto and Digital Assets Summit
Bim Afolami speaking at the FT’s Crypto and Digital Assets Summit © The Lens box

FCA chief executive Nikhil Rathi told the committee that the regulator’s current framework allowed it to name companies under investigation only in “exceptional” circumstances. “Sadly, investment fraud is not exceptional,” he said. 

Following a consultation, which closed last week, Rathi said the regulator would take “several months” to consider the feedback it had received. 

Afolami, who last year called on the FCA to allow more risk-taking in the sectors it regulates, said on Wednesday its progress towards that objective was “mixed” and that its approach risked putting off overseas investors.

“Stop focusing on things that are non-core like naming and shaming, and this diversity consultation,” he said, referring to an FCA consultation on measures to boost diversity and inclusion at regulated companies.

“That sort of thing means that the signal to international investors . . . is that the regulator still doesn’t get it,” Afolami said.

Afolami also rejected concerns raised by former FCA chair Charles Randell that the government’s approach to regulating cryptocurrencies would bring “retail crypto speculation firmly into the mainstream”, even though fraud was “a feature, not a bug” of much of the industry. 

“We all want to tackle fraud, we recognise it’s a big problem. But frankly, there’s more than enough fraud in the traditional financial services sector,” the minister said.

“It’s arrogant to think that ordinary people won’t be able to make judgments,” he added, describing concerns about retail investors being duped as “really patronising”.


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