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The UK Financial Watchdog is set to abandon the controversial plan of “being “named and embarrassed” more companies it investigates, marking major U-turns after regulators pressured them to drop their policies.
According to those familiar with the issue, the Financial Conduct Department is scheduled to announce on Wednesday that proposals to apply a new public interest test for whether or not to disclose more businesses have been removed. Instead, they stick to existing, more stringent “exceptional situations” tests.
This is a major reversal for UK regulators, which sparked a major backlash from the city and criticism from government officials when it announced its plans in February 2024.
FCA CEO Nikhil Rathi opened fire for the proposal amid growing concerns that regulatory proposals are driving business overseas as the government is trying to boost growth.
The government is pushing regulators of many countries to present more growth promotion proposals. On Tuesday, Sir Kiel Starmer said he decided to x Payment Systems Regulatory Authority by merging with the FCA.
That’s because the minister pushed the chair of the Department of Competition and Markets after he determined that he was insufficiently focusing on growth.
The U-turn means applying narrow parameters that are published to the survey under which the survey is being investigated, despite guarantees from the FCA.
In November, the FCA responded to criticism of its proposal to disclose more companies to investigate by providing not just one but 10-day notice, taking into account the impact on the company, stock prices and wide range of financial stability.
He also said the new policy would lead to another one or two investigations where one or two regulatory companies are disclosed each year.
The FCA formed a call with industry groups on Tuesday to inform the plan and state that it will notify the House Treasury Department Select Committee and the Senate Financial Services Regulation Committee in writing, according to those who explained the conversation.
The FCA declined to comment.
Last month, a Senate committee condemned the plan, calling it an “abject breakdown” in a bruise episode of the FCA. The committee’s conservative chairman, Lord Michael Forsyth, said regulators have failed to assert “this radical change.”
The FCA will continue its plans to open up the unregulated companies it is investigating. This said there is widespread support for financial services and those familiar with the issue have confirmed the investigation to see if it has already been disclosed by other public agencies.
A senior FCA official has previously said that companies being investigated can be named to prevent the investigation from causing more harm to customers while they are going on, as has happened in cases such as the UK’s false sales scandal of steel pension advice.
Two-thirds of the FCA investigation will end without enforcement action and raise concerns that disclosure of identity could damage the company’s reputation even if the probe does not find fraud.
However, regulators have tried to raise the bars needed to open the investigation. Since April 2023, the number of public surveys at the FCA has fallen by 35%, but none of those open since then have been closed.
