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Jeremy Hunt has warned the Financial Conduct Authority over its plan to “name and shame” companies under investigation in an unusual broadside against the UK’s top financial regulator.
“I hope the FCA will reconsider its decision,” the chancellor told the Financial Times, pointing to the regulator’s plan to publicly disclose the identities of companies being investigated more frequently and at a much earlier stage.
The comments represent a rare intervention by a chancellor into policy-making at the FCA, which is independent of the then government. Hunt is trying to revitalize Britain’s capital markets, encourage investment and stimulate economic growth.
The FCA said the plan would increase transparency and strengthen the deterrent effect of its investigations. The regulator currently discloses investigations in “exceptional circumstances” but wants to move to a looser “public interest” test. A consultation ended on Tuesday.
The proposal has caused outrage across the government, the City of London and the wider financial services sector. Executives claimed it undermined the principle that companies should be “deemed innocent until proven guilty” and feared it would harm the city’s international competitiveness.
Last year, ministers gave the FCA and the Prudential Regulation Authority new competition and growth targets after resisting a more radical suggestion that the government should intervene directly in their decisions.
Hunt told the Financial Times: “Last year the law changed in the financial services market [the FCA] have a secondary growth task. “On this basis, I hope they reconsider their ‘naming and shaming’ decision, as it appears to be inconsistent with their new secondary growth obligation.”
British regulators in other sectors – such as communications, competition, accounting and energy – often name companies under investigation before concluding whether they have broken rules.
However, this practice contradicts foreign authorities such as the US Securities and Exchange Commission and the German financial regulator BaFin.
Hunt said the financial services industry needed to be viewed differently to other sectors where UK regulators name companies under investigation.
“How you stimulate growth varies from sector to sector, so I think it is entirely sensible to name and shame a failing water company that has an outrageous number of leaks,” the Chancellor said. “But I think in the financial services context it’s different.”
The FCA responded to Hunt’s comments: “We support our secondary objective of promoting international competitiveness and growth, alongside the primary objectives set for us by Parliament, namely consumer protection, 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 consider our next steps.”
The Managed Funds Association, a Washington-based industry group representing alternative asset managers, also called on the FCA to withdraw the proposal, saying it would damage Britain’s position as a global financial center.
Bryan Corbett, the association’s president and CEO, said Tuesday that publicly naming companies before wrongdoing is found would hurt economic competitiveness.
“The proposal introduces a host of new risks for alternative asset managers,” he said. “The result is that many companies are leaving the UK or never entering the UK again.”
In a letter to the House of Lords Financial Services Regulation Committee published on Friday, the FCA insisted it would continue to “treat the subjects of the investigation fairly and comply with the legal limits of evidence”.
In the letter, Therese Chambers and Steve Smart, the FCA’s executive directors for enforcement and market supervision, said that announcing an investigation in “factual and measured” language did not constitute “naming and shaming”.
“Ultimately, we all want the UK financial markets to maintain their competitiveness and continue to thrive and grow on the reputation on which they were built: fair play, cleanliness and integrity,” they said.
The committee said the transparency plan “could have a disproportionate impact on companies named in investigations.”
As part of an investigation into mis-selling to members of the British Steel Pension Scheme in 2022, the House of Commons Public Accounts Committee called on the FCA to publish lists of parties under investigation in cases where companies are at risk of abusing the Cause permanent harm to consumers basis.