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Britain’s financial watchdog is set to largely abandon its controversial plan to “name and shame” more companies that it investigates, marking a major U-turn after the regulator faced mounting pressure to drop the policy.
The Financial Conduct Authority plans to announce on Wednesday that its proposal to apply a new public interest test on whether to disclose more companies under investigation has been scrapped, according to people familiar with the matter. Instead, it is sticking to its existing stricter “exceptional circumstances” test.
It is a significant reversal for the UK regulator, which triggered a major backlash from the City and criticism from government officials when it announced the plans in February 2024.
Nikhil Rathi, FCA chief executive, has come under fire for the proposal amid growing concerns that the regulator’s proposals are driving business abroad at a time when the government is trying to boost growth.
The government has pushed many of the country’s regulators to present more pro-growth proposals. On Tuesday, Sir Keir Starmer said he had decided to axe the Payment Systems Regulator by merging it with the FCA.
That comes weeks after ministers pushed out the chair of the Competition and Markets Authority after deciding he was insufficiently focused on growth.
The U-turn comes despite assurances from the FCA that it would apply narrow parameters on which investigations it would announce by weighing the impact on the company under scrutiny.
In November, the FCA responded to criticism of its proposals to disclose more of the companies it investigates by saying it would give companies 10 days’ notice instead of only one and take into account the impact on a firm, its share price and wider financial stability.
It also said the new policy would only lead to another one or two investigations into regulated companies being disclosed each year, on top of the one or two that already are.
The FCA organised a call on Tuesday with industry bodies to inform them of its plans and said it would notify the House of Commons’ Treasury select committee and the House of Lords’ Financial Services Regulation Committee in writing, according to people briefed on the conversation.
The FCA declined to comment.
The Lords committee last month slammed the plan, calling it an “abject failure” in a bruising episode for the FCA. Lord Michael Forsyth, Conservative chair of the committee, said the regulator had failed to make the case for “such a fundamental change”.
The FCA will continue with plans to publicly name unregulated firms it investigates, for which it said there was broad support in financial services, as well as to confirm investigations if they have already been disclosed by other public bodies, the people familiar with the matter said.
Senior FCA officials have previously said they want to be able to name companies that are being investigated to prevent more harm being done to customers while the probe is ongoing, as happened in cases such as the British Steel pension advice mis-selling scandal.
Two-thirds of FCA investigations have ended without any enforcement action, raising concerns that it could damage the reputation of companies by disclosing their identity even if the probe did not find any wrongdoing.
But regulators have sought to raise the bar needed to open an investigation. Since April 2023, the number of open investigations at the FCA has declined by 35 per cent, while none of those opened since then have been closed without it taking further action.