The International Underwriting Association of London (IUA) is strongly against the Financial Conduct Authority’s (FCA) proposal to announce regulatory investigations prior to reaching decisions.
In February, the FCA opened a consultation on its plan to improve transparency by announcing the regulator’s enforcement probes ahead of concluding them.
“In future, we want to proactively publish more information about our enforcement investigations including their opening and progress,” the watchdog said in its consultation paper. “This includes publishing the identity of the subject of the investigation, if we assess that it is in the public interest to do so and if there are no compelling legal or other reasons not to.
“It will also include publishing updates on our investigations and announcing that we have closed cases where our investigations have not led to regulatory or other action. We will decide whether and what to publish on a case-by-case basis, using a new public interest framework and taking all relevant facts and circumstances into account.”
The FCA also noted: “Announcements we make about our investigations will make it clear that we have not yet decided whether there has been misconduct or breaches of our requirements, unless it is inappropriate to do so.”
The consultation closed on Tuesday, April 30.
Expressing strong opposition to the plan, the IUA issued a public warning while also filing its formal response with the regulator.
“The concept of ‘innocent until proven guilty’ is a fundamental doctrine of criminal law, and the mere association with an ongoing investigation could cause substantial harm to a firm’s standing in the market,” IUA director of public policy Helen Dalziel stated.
“If individuals are named and shamed before the outcome of an investigation is determined, there is a real danger that the possibility of a fair trial by an impartial tribunal would be impeded. Early disclosure of unverified facts and negative media coverage could create a prejudicial environment with guilt presumed.
“Publishing any investigations that have not been fairly concluded is only likely to erode, rather than encourage, trust and confidence in financial services.”
In the IUA’s view, the proposed change by the FCA could cause irreparable reputational damage and financial hardship, even though firms may subsequently be found innocent.
“Premature publication of investigations may create an unwarranted perception of systemic problems within the financial services industry, impacting other companies not subject to enquiries,” the IUA went on to warn. “It may also increase the cost and restrict the availability of directors and officers insurance for firms regulated by the Financial Conduct Authority.”
The FCA said it will be publishing a policy statement after careful consideration of the consultation responses.
What do you think about this story? Share your thoughts in the comments below.
