Link(s): Update on the FCA’s enforcement transparency proposals | FCA
Our letter to the Treasury Select Committee on the FCA’s enforcement work and diversity & inclusion
Context
The FCA has announced that it has written to the Treasury Select Committee, setting out what it refers to as the “significant improvement in the pace” of its investigations. In reality, this is not the main purpose of the correspondence as it sets out the next steps in the FCA’s approach to transparency of enforcement investigations, diversity and inclusion work, and non-financial misconduct.
Key points to note and next actions
Enforcement transparency – proposed change to the current investigation transparency and publication policy not being taken forward
Following its second Consultation on perhaps the more contentious elements of the overall enforcement transparency proposals, the FCA has confirmed that there is a lack of consensus on how to proceed. As a result, the FCA will not take forward its proposal to shift from an “exceptional circumstances” test to a “public interest” test for announcing investigations into regulated firms. The effect of the switch to the ‘public interest’ test would have been that more investigations would be announced earlier in their proceedings, rather than once the investigations were completed.
However, following extensive engagement, there is support for some of or variations to the proposals, so the FCA will publish a final Policy Statement by the end of June 2025 and will take forward the following proposals:
- reactively confirming investigations already in the public domain (officially announced by others, typically market announcements or other disclosures made by firms themselves or sometimes announcements by a partner regulator. Of the FCA’s current 37 open investigations into regulated or listed firms, 22 are already in the public domain);
- public notifications which focus on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter (around 60% of current investigations into firms relate to activities of unregulated firms, which are often frauds involving significant consumer harm, and where the FCA has no supervisory tools available); and
- publishing greater detail of issues under investigation on an anonymous basis.
Joint FCA and PRA update on diversity and inclusion
In 2023, the FCA and Prudential Regulation Authority (PRA) consulted in parallel on proposed rules and expectations aimed at improving diversity and inclusion in regulated firms. In light of, and having considered, the broad range of feedback received (including the recommendations in the ‘Sexism and the City’ report published by the Treasury Select Committee in the last Parliament), expected legislative developments and to avoid additional burdens on firms at this time (particularly from the data collection proposals, which would have created a further data collection and submission burden for firms), the FCA and PRA have no plans to take the work further.
Alongside this announcement, the FCA has commented on its proposed work with the PRA to review the impact of removing the bonus cap on gender pay and inequality. Given the time it will take for firms to make changes, the FCA will assess whether it will do this work in the 2026/27 financial year.
FCA update on non-financial misconduct
The FCA has told the Treasury Committee that it continues to prioritise its work to tackle non-financial misconduct, which the FCA believes can help to improve outcomes for markets and consumers and reduce harm. The FCA, though, sets out the importance of a proportionate approach which is aligned with planned legislation. That being the case, the FCA is “taking some further time to get this right”, and will set its planned next steps by the end of June this year.