Richard Ellis, partner at Charles Russell Speechlys, likewise highlights the FCA’s existing power to identify subjects of investigations in exceptional circumstances.
“As such, this weapon is already in the FCA’s arsenal. Any deterrence angle is already covered. Given this, it seems likely that the FCA is asking for greater scope because it wants to use it.
“The FCA’s thinking seems to be that identifying a firm as being under investigation would encourage witnesses and whistleblowers to come forward. That aim could only be achieved if the power were actually used.”
According to the framework, an announcement or update on an enforcement investigation will usually be in the public interest when, among other things, it is likely to:
- assist the FCA’s investigation, for example by encouraging potential witnesses or whistleblowers to come forward;
- address public concern or speculation, including by correcting information already in the public domain; and
- provide reassurance that the FCA is taking appropriate action.
“The FCA will need to establish clear and objective metrics for decision-making, with sufficient senior management oversight to ensure a consistent and fair approach is applied,” says Alleyne at Kingsley Napley. “One particular issue that will need addressing is the question of firms with listed shares.
“Those firms, and their share price, are likely to be affected much more than private companies by being named, which may create a presumption against naming them. This in itself will create an unlevel playing field and could give rise to potential widespread unfairness.”
There are inherent risks of inconsistency in any policy being applied case-by-case, says Imogen Makin, a counsel at Wilmer Hale specialising in financial services investigations.
“However, if this new policy has to be introduced, it is by far a better outcome for regulated firms that it is applied on a case-by-case basis, preferably taking into account representations from the investigation subject, than early publication being applied across the board, which would be far more unpalatable.”
Ellis agrees that in practice whether or not to identify a firm would always need to be decided case-by-case, unless identification were to take place in every case, which seems unlikely.
“Consequently, there is a clear risk of inconsistency and unfairness regarding whether or not a firm will be identified. There is also a danger that this process could lead, even subconsciously, to an element of bias during the investigation.
“If an investigator has decided, using their own discretion, that it is appropriate to identify a firm, then it may be likely that they may later be reluctant to acknowledge that the firm has not been guilty of the suspected misconduct.
“It may be assumed that such bias would not lead to investigations reaching the wrong conclusion in the end but it is possible that such bias may lead to investigations being extended for longer than necessary.”
Statutory immunity from damages
Despite concerns about reputational damage to firms, the FCA is immune from liability in damages, unless it is found to have acted in bad faith or breached human rights.
