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Jeremy Hunt has warned the Financial Conduct Authority against its plan to “name and shame” companies under investigation in an unusual broadside against the UK’s top financial regulator.
“I hope the FCA re-look at their decision,” the chancellor told the Financial Times, referring to the watchdog’s plan to publicly disclose the identities of companies under investigation more frequently and at a much earlier stage.
The comments are a rare intervention by a chancellor on policymaking by the FCA, which is independent from the government of the day. It comes as Hunt tries to revitalise the UK’s capital markets, encourage investment and stimulate economic growth.
The FCA has said the plan would boost transparency and increase the deterrent effect of its probes. The regulator currently discloses investigations in “exceptional circumstances” but wants to move to a looser “public interest” test. A consultation closed on Tuesday.
The proposal has sparked fury within the government, the City of London and the wider financial services sector. Executives have claimed it undermines the principle that firms should be deemed “innocent until proven guilty” and they fear it will harm the City’s international competitiveness.
Last year ministers gave the FCA and the Prudential Regulation Authority new competitiveness and growth objectives after they resisted a more radical proposal for the government to intervene directly in their decisions.
Hunt told the FT: “Last year the law changed in the financial services market and [the FCA] have a secondary growth duty. On the basis of that I hope they re-look at their ‘naming and shaming’ decision because it doesn’t feel consistent with that new secondary growth duty that they have.”
UK regulators in other sectors — such as communications, competition, accounting and energy — frequently name companies that are under investigation before concluding whether they have breached any rules.
But the practice is at odds with overseas agencies such as the US Securities and Exchange Commission and the German financial regulator BaFin.
Hunt said the financial services industry had to be seen differently to other sectors where UK regulatory agencies name businesses under investigation.
“How you stimulate growth is different sector by sector so I think it’s completely reasonable to name and shame a failing water company which has outrageous amounts of leaks,” the chancellor said. “But I think, in a financial services context, it’s different.”
The FCA said in response to Hunt’s comments: “We embrace our secondary objective to facilitate international competitiveness and growth alongside the primary objectives given to us by parliament to protect consumers, market integrity and effective competition.
“As we have said throughout the process, this is a consultation. We will listen carefully to the extensive feedback we have received, including from Government as we reflect on our next steps.”
The Managed Funds Association, an industry group based in Washington representing alternative asset managers, also called for the FCA to withdraw the proposal, saying it would damage the UK’s position as a global financial centre.
Bryan Corbett, the association’s president and CEO, said on Tuesday that publicly naming firms before any wrongdoing was established would undermine economic competitiveness.
“The proposal introduces a host of new risks for alternative asset managers,” he said. “As a result, many firms may leave or never enter the UK.”
In a letter published on Friday to the House of Lords financial services regulation committee, the FCA insisted it would continue to “treat subjects of investigation fairly and meet legal thresholds of proof”.
In the letter, Therese Chambers and Steve Smart, the FCA’s executive directors for enforcement and market oversight, said announcing an investigation in “factual and measured” language did not constitute “naming and shaming”.
“Ultimately, we all want the UK’s financial markets to sustain their competitiveness and continue to flourish and grow on the reputation that they were built on: fair play, cleanliness and integrity,” they said.
The committee has said the plan for more transparency risks “having a disproportionate effect on firms named in investigations”.
In a 2022 investigation into mis-selling to members of the British Steel Pension Scheme, the House of Commons public accounts committee called on the FCA to publish lists of parties under investigation in cases where there was a risk that firms were harming consumers on an ongoing basis.