The concluding part of our report on the FCA’s Therese Chambers’ defence of the regulator’s enforcement publicity proposals at a Simmons & Simmons webinar focuses on how the enforcement and markets chief sees the proposal working in practice.

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 proposed approach to publicising enforcement investigations, as set out in CP24/2 and CP24/2 Part 2.

Having explained why the FCA remains committed to the headline proposal to make public announcements that it has opened an investigation into a firm, Chambers was keen to make some key practical points.

• All cases will be assessed on a case-by-case basis.
• Publicity notices, trailed in the case studies section of Part 2 of the consultation, will be two sentences (including a caveat).
• The decision on whether or not to make an announcement would ultimately sit with Steve Smart and Therese Chambers as the executive directors.
• Firms would be given 10 days’ notice ahead of any announcement being made. During this period, firms could make representations. If the FCA decides to announce, firms would then have an additional 48 hours’ notice before publication.
• After an announcement there would be ongoing statements and closure publicity.

Questions to Therese Chambers

How is this going to work in practise?

Chambers answered: “When we open an investigation we will spend some time internally working out the scope of that investigation and our initial plan of work.

“As part of that early preparation we consider whether the case is a candidate for some type of transparency. Some investigations we know a lot about when we open them, others we don’t know much about, so that will be a factor in our thinking – for example, where we’ve already imposed business restrictions on a firm and published a supervisory notice. We may take the view that case would be a candidate for early consideration around transparency.

“In other cases, we may take the view that actually we need to do some more investigative work and reflect on what we found. It will be at that point where we all consider whether the matter is a candidate for transparency.”

Note, the case studies published in part two of the consultation contain examples of the two-sentence announcement (including the caveat): “The Financial Conduct Authority has begun an investigation into XXXX company in connection with [BREACH/WRONGING]. We have not reached any conclusions as to whether regulatory requirements have been breached.”  

“Ultimately the decision on whether or not to make an announcement would sit with Steve Smart and myself as the executive directors.”

Chambers explained that is “similar to what we say now in relation to those exceptional circumstances where we do say something very short. I think the most important thing that we would share would be an indication of our reasoning.

“So in order to assess something as a candidate, we would have to go through the public interest framework. We would share those factors with the firm. Then the firm has 10 business days to consider our thinking and to respond.

“The investigations team would review and assess the response with input from our independent legal teams. We would consult our supervision teams as well to make sure that we have the full picture. Ultimately the decision on whether or not to make an announcement would sit with Steve Smart and myself as the executive directors.

Should the final decision be taken by a separate body such as the RDC?

“We don’t think that it’s necessary. We think this is an executive decision,” Chambers replied.

“There are not many decisions about enforcement cases that are taken at that level. The only other decisions that we take as standard are the decisions to charge an individual with a criminal defence. All other decisions are typically taken at lower levels. So that is an indication of the seriousness with which we take this and the respect that we will have for this process. Members of the executive committee of the FCA report to the board.”

What evidence are you looking for from firms when they’re making those representations?

Makin gave an example where a firm may say ‘if you make this announcement, it could have a very serious impact on our day-to-day operations of our business shareholders.’ However, firms can’t prove this as it hasn’t happened yet.

“All firms have different business modules,” said Chambers. “Some firms are more immune to outside noise than others, so it would be a case-by-case assessment. Some firms will have had experience of being under investigation, whether in the UK or elsewhere and will have experience of the impact, if any, on their business model, that will be useful for us to understand.

“We recognise that it’s hard to put a crystal ball in representations and have an accurate forecast of what is going to happen.

“We already have some experience on what we think the impact on the firm will be because we do typically publish our supervisory notices. Part of our thinking around when we publish our supervisory notices will be around how proportionate is the impact on the firm. The bottom line here is we would be looking at the public interest in the round. This will be a balancing exercise. It will be very important for us to understand as clearly as possible.”

“We don’t wave Principle 11 around like confetti, we take that quite seriously.”

How likely is the FCA to interpret a robust public response to an FCA announcement as a breach of Principle 11?

“We concluded our very long running operation in relation to Barclays about fundraising during the financial crisis. You’ll recall that we concluded that at the door of the tribunal. We published our press release, you may have noticed Barclays published their own press release, which set out their view very firmly (as they are perfectly entitled to do). As any firm is perfectly entitled to do. If a firm chooses to engage publicly in a debate, that’s their choice. That is absolutely fine. We don’t envision that will cause us any difficulty, that’s an avenue that is totally open to the firm.

“We don’t wave Principle 11 around like confetti, we take that quite seriously.”

It wouldn’t be difficult to identify SMFs following the public announcement of the firm name. How will you deal with any representations from individuals?

“I think we are anticipating that those factors will be wrapped into the representations that come from the firm. This is factored in the revised public interest framework. It is the firm that is the subject of our investigation and it is the firm that will be the subject of any announcement.

Tell us about the case studies in the Part 2 of the consultation.

“We put four case studies in our consultation paper. When we selected those case studies, we weren’t picking four out of 40 possible instances that we could talk about to illustrate the new approach. There was actually quite a small number of possible cases that it would have been useful for us to talk about as potential candidates. The four that we’ve published, and maybe one or two others. However, we felt that one or two others were too marginal to be of assistance.

“It is the firm that is the subject of our investigation and it is the firm that will be the subject of any announcement.”

“In one of those cases in the future, we would be convinced by the representations that actually it was not in the public interest to make the announcement. That is an indication that we’re looking at very small numbers. Another indication that we’re looking at very small numbers is if we look at the number of investigations that we’ve opened since April 2023 – 15 investigations into regulated firms, and we only announced our investigation into LME under the exceptional circumstances test.

“One of those investigations is Coinbase which we have identified as a potential candidate in the consultation. There’s one other investigation that involves significant consumer harm and it also has a public profile. That’s three candidates out of 15.”

Reactive disclosure

Chambers was asked about cases where it’s not so rare and unusual that it would meet requirements for public disclosure but nevertheless important because those firms could better.

“Proactive disclosure is not the only game in town,” she answered. “We would like to make anonymous disclosures in the case that you’re describing as it sounds like there would be a public interest in saying something. If we were to make an anonymous announcement, it would be sufficient to discharge the public interest, then we would stop at that.

“Where we’ve made an announcement that we’re investigating a firm, and the next time our CEO appears in front of the treasury select committee, he perhaps gets asked about it. He is able to say, ‘yes, the investigation is still ongoing’ or ‘we are in the final stages of our investigation’.”

Closure of cases

“This is something that we would have to think about very carefully. If we’ve investigated and found absolutely nothing at all then we would want to consider very carefully [on the next steps] with the firm.

“Cases close in slightly different circumstances where a witness won’t cooperate or relevant materials are overseas and we can’t get hold of it, or there’s been a lack of cooperation. Those types of cases are not closures with a clean bill.”

Therefore Chambers determined that it would be appropriate to surmise that each closure and statement would be determined “on an individual case-by-case basis.”

Feedback to the second consultation closes on February 17, 2025.

Interview questions by Emma Sutcliffe and Tom Makin.