Pimfa has joined 15 other financial services trade bodies in calling for the Chancellor to intervene over the Financial Conduct Authority’s (FCA) proposals to publicise enforcement investigations.
Pimfa, along with UK Finance, TheCityUK, the Association of British Insurers (ABI), and others, has written to Chancellor of the Exchequer, Jeremy Hunt, highlighting concern that the FCA will be able to “publicly name firms at the start of an investigation and before a decision has been reached on whether to take further action.”
Currently, the regulator only makes enforcement action public when a financial services company is determined to have violated the FCA’s regulations or engaged in misconduct.
The letter emphasises that the sector is against the proposed changes because they could negatively impact market stability, citing harm to the UK’s competitiveness and departure from global standards.
It requests that the FCA abandon its plans and instead recommends “improved transparency, educating the sector on enforcement issues, and reducing the time to conclude cases could be achieved within the current framework and without the need to name firms.”
Pimfa chief executive Liz Field says: “It is very difficult to see how the FCA’s proposals to publicise enforcement investigations will be of benefit to either consumer confidence and trust in financial services or to the integrity of the market overall.
“The FCA’s argument that an enforcement investigation does not automatically mean that there has been misconduct or breaches of its requirements seem to us to show a degree of naivety around the way the real-world works. An announcement of an investigation will lead many to believe there is no smoke without fire and assume guilt on the part of the firm being investigated, particularly if this is fuelled by press speculation.
“For smaller firms, the impact could be devastating, with clients leaving in droves despite there being no immediate evidence of actual wrongdoing on the part of the firm. Larger listed firms will almost certainly be subject to significant market volatility because of shareholder action or could see significant outflows of assets – potentially leaving them hollowed out.
“We cannot understand how these proposals support the FCA’s role of promoting UK competitiveness and economic growth, while ensuring consumer confidence through the way in which it supervises and regulates the industry. The proposals appear to contradict the former and do little to promote the latter.”