Therese Chambers, the FCA’s joint executive director of Enforcement and Market Oversight, joined Emma Sutcliffe, head of the Disputes and Investigations Group and Tom Makin, associate at Simmons & Simmons, for a discussion on the FCA’s new approach to publicising enforcement investigations, as set out in CP24/2.

In our first article covering the event, we reported how Chambers discussed what publicity notices will look like and what criteria will be used by the FCA to determine issuance. This article looks at practical considerations for regulated firms.

Key takeaways

• The FCA will not follow one universal timetable when deciding upon the timing of an enforcement announcement.
• The 24-hour notice period prior to the publicity statement is to signal that the FCA wants to take these decisions quickly.
• The FCA will review on a case-by-case basis when deciding which thresholds need to be met before making a publicity statement.
• Publicity of enforcements will be sector neutral in line with the FCA’s statutory objectives to protect consumers and markets.
• The content of the single-page publicity announcement will have enough information for firms to recognize the issue of concern and give consumers confidence that appropriate regulatory action is being taken.
• The FCA took a lookback at the last nine months and said two-thirds of cases would have been publicized early.
• The FCA acknowledges that firms are not 100% happy with what it is proposing and that is why it is asking for feedback.
• The consultation closes on April 30th.

Questions to Therese Chambers

When in the enforcement process are you anticipating that the publicity announcement will happen?

“A great question! We will need to approach this on a case-by-case basis when considering the timing of any announcement as well as to the content of any announcement. There will not be one universal rule or one universal timetable that we follow.”

Chambers anticipated the approach in the context of a regulatory investigation timeline. “The first decision is to open an investigation. The second step is to scope and plan the investigation. And the third step is usually to connect with the firm that is the subject of the investigation to discuss scope and immediate next steps.

“I anticipate that in many cases after that meeting we would move to the publication decision.”

But Chambers warned: “There will be other cases where it’s imperative that we announce very early. For example, attracting significant public attention when there’s a public confidence issue. And there are some matters that we would announce very late or potentially not at all, because we’re conducting covert enquiries.”

Is one business day notice before the publicity announcement an appropriate amount of time for every firm?

“Our 24-hour notice has attracted a lot of attention from people who’ve been reviewing our proposals. What we’re trying to signal here is, we want to take these decisions quickly, rather than allowing them to spin out and become collateral discussions around the boundaries of the investigation, which would slow us down in getting on with the investigation.

“Obviously, this is a consultation and I have no doubt that we all get a number of responses saying 24 hours simply doesn’t work and maybe the 24 hours simply won’t work. But what we’re saying is that we expect this to take days rather than weeks when we make these decisions.”

If you’re going to be making decisions quickly, how is that going to work within the FCA?

“These decisions will be made at senior levels within enforcement. They will be made with the benefits of legal advice which now sits outside of enforcement with a different reporting line. We will record our decisions and the reasons for our decisions, as you would expect us to do for any decision of that sort.”

How have you given thought to the thresholds that need to be hit in order for the FCA to think yes, we need to publish?

(Makin put the question into context with a client concern: if a firm is mentioned in a publicity announcement, the press may give undue prominence to their enforcement action over firms which were not subject to a publicity statement.)

“We’ve deliberately put the frameworks together in a way that is high level and flexible. It is genuinely on a case-by-case basis rather than constraining ourselves with multiple factors or thresholds. It is not our current intention to multiply out factors and thresholds, but we will be really interested to hear feedback on that.”

Can you see this working the same across all sectors, both wholesale and retail?

“I think it’s sector neutral. You know that we’ve tried to replicate the theme of our statutory objectives which involves not only protecting consumers – it is also protecting markets.”

What is your policy on social publicity after closing an investigation?

(Makin said that Chambers had earlier suggested that the FCA will make sure that social publicity is given to the closing of investigations but in the consultation one of the options is to update the website rather than make a formal public announcement.)

“I think that’s something that’s been quite concerning to a lot of people. We’ve set out options in the consultation paper because we want to hear views on those options and we genuinely want to understand what people think about that. I can’t tell you where we’ll end up because I don’t know. We’ll need to get all the feedback in and analyze it carefully to help us make those decisions.”

What content do you envisage in the one-page publicity announcement?

“I think this is a good question and one that we’ll have to work through in practice. The purpose is to give enough information to firms so that they can identify an area that they need to look at themselves.

“And it is to give confidence to consumers that appropriate regulatory action is being taken.”

What about the burden on the regulated community – have you taken this into account?

(Makin put his question into context by asking when the FCA decide that it’s in the public interest to make an announcement, will that then be weighed against the impact on firms? Does the FCA see it as a balancing exercise?

Chambers replied: “First we will apply the public interest framework to see exactly where the public interest lies. Then we look at the broader context, at other factors and circumstances that are relevant to our decision making.

“Impact maybe one, there may be others but don’t ask me for a long list!”

How do you think this will speed up your investigations?

“There’s an operational benefit in enabling witnesses and whistleblowers to come forward rather than us having to detect their existence, which is the way it currently works. 

“In our experience when you find people know about our investigations, they do contact us. That contact should assist us in pace because it will give us access to material earlier.”

Chambers noted other operational changes that the FCA is making to increase pace include: “Making sure that we’re picking the right cases. Making sure that we’re confident in our decision making. If we think a case is going nowhere, then we need to make that decision at the earliest possible date, even though that can be a very uncomfortable thing to do.”

Once the FCA has announced its investigation, will there be an incentive for the FCA to make a finding because it has told the world?

“We will of course keep questions like that in mind. At the moment 65% of our investigations close with no further action, I would like to see that come down a bit but there will still be many investigations that close with no further action.

“I don’t see it as introducing additional bias, part of the reason we want to do this is because it increases our own transparency and our own accountability.

“Sometimes transparency can feel uncomfortable. But we think as a regulator it is right to put ourselves in a place where we can be properly scrutinised.”

Have you looked at data to suggest what percentages of cases may be publicized early?

“We’ve done a look back over the past nine months of open investigations and our conclusion was that about two thirds of those investigations would have been likely to have been announced had these new proposals been in place.”

Final thoughts

“I’m sure you’re not 100% happy with what we are proposing. We will welcome your feedback and we will listen to it very carefully.”

Interview questions by Tom Makin.

GRIP Comment

Rob Mason, Head of Regulatory Intelligence at Global Relay said: “I believe this may be a lever which the FCA may use to settle a case at an early stage. This may only be relevant to a clear failing that is indisputable (for example a SYSC outage) – instead of a long and protracted investigation with legal wrangling where the firm is named at the start and updates are published throughout. It may be desirable for all parties to settle quickly and move on.

“This could be an effective incentive!”