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UK’s FCA plans to announce corporate probes early in deterrent push

General view of the Financial Conduct Authority (FCA) offices in London, Britain, May 4, 2022. REUTERS/Peter Nicholls/File Photo
General view of the Financial Conduct Authority (FCA) offices in London, Britain, May 4, 2022. REUTERS/Peter Nicholls/File Photo

Britain’s market regulator plans to announce corporate investigations earlier, publish updates and close inquiries more quickly in an effort to prioritise cases with the most impact and reassure the public that “we are on the case”.

The Financial Conduct Authority’s (FCA) co-head of enforcement Therese Chambers told a London conference on Tuesday that the proposals, outlined in a consultation paper, marked a “dramatic change of approach” and would help deter misconduct.

“We will amplify the deterrent impact of our work by enabling firms to understand the types of serious failings that can lead to an investigation, helping them to change their own behaviour more quickly,” she said.

But lawyers and PIMFA, an industry body for financial advisers, said being publicly named in an FCA investigation before all evidence was assessed risked “gross unfairness” and raised questions about who would really benefit.

“The FCA’s proposal to publicise the start of corporate investigations seems more about trumpeting its work than giving out useful information,” said Simon Morris, a partner at law firm CMS.

PIMFA urged the FCA to consider the move carefully and Imogen Makin, counsel at law firm WilmerHale, pointed to the low threshold for opening inquiries.

“The damage to firms’ reputations and to ongoing business from the early announcement of an FCA investigation would be significant, without any proof of wrongdoing, and seems unjustified,” she said.

The FCA currently announces details of inquiries only in exceptional circumstances and, when it does, there is a time lag between when misconduct is identified and any announcement. This is compounded by the years it can take to bring a case to trial because of a backlog of outstanding court cases.

The regulator, which opened 100 new enforcement cases in the year to March 2023, down 48 per cent from the previous year, is calling for a response to its proposals by April 16.

Chambers stressed that decisions to announce investigations would be taken on a case-by-case basis and depend, in part, on whether any inquiry was covert. Investigations into individuals will not be announced because of data protection requirements.

Around 65 per cent of FCA investigations currently close without further action, Chambers told the City & Financial Global London summit into market abuse and market manipulation.

The FCA hopes to close those investigations at the earliest point “rather than the latest possible point, which is possibly a practice we have fallen into now,” she added.

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