Named and Shamed: UK Regulator to Publicly Reveal Probed Firms

by Damian Chmiel
  • The regulator will reveal more about company probes earlier to boost market transparency.
  • Also, similar to the US SEC, the market watchdog wants to offer financial incentives to informants.
FCA

The Financial Conduct Authority (FCA), the financial regulator in the UK, plans to publicize more information about its investigations into companies earlier in the process. According to one of the watchdog's representatives, more information will be presented today (Tuesday) in an industry consultation paper.

That may bring a major change to the UK's market transparency, as historically, the FCA has not commented on most investigations until penalties are announced. Furthermore, the UK wants to follow the US's lead and introduce incentives for whistleblowers.

The UK Financial Regulator Plans More Transparency on Investigations

Under the new approach that will be outlined in a consultation paper, the FCA aims to name companies under investigation once it opens a formal probe. The goal is to encourage witnesses and whistleblowers to come forward and deter misconduct in the industry. Legal restrictions limit naming individuals.

Therese Chambers, the Head of Enforcement at the FCA, told the Financial Times (FT) that more transparency will "enable firms to start putting their houses in order where they need to at an earlier date." Last year, the FCA issued only eight fines, the lowest level in a decade. The agency blames the Covid-19 pandemic and court backlogs.

Two new enforcement leaders: Chambers and Steve Smart plan to review whistleblower policies at the FCA. They may consider financial incentives for whistleblowers, a common practice in the US, but not currently used in the UK. Especially since such actions are supported by the new Director of the Serious Fraud Office (SFO), Nick Ephgrave.

"I am very happy that we look again at incentivization," Smart said to FT. "We'll talk to the SFO as to what they're thinking is and where they're looking to go on it, and then come to make a decision."

The consultation paper is set to mark a shift for the FCA. Under past leadership, probes were described as "open-minded explorations of an issue" rather than focused on outcomes. Currently, about 65% of FCA investigations close without penalties or charges.

The increased transparency aims to bolster the FCA's reputation as an enforcement agency and deter misconduct in the UK's large financial services industry. In 2023, the institution reached a new milestone by issuing 2,286 scam alerts on its public Warning List, marking an increase of 21% from the 1,882 alerts distributed in 2022.

Regulatory Hurdles in Fintech, Crypto, and Equities Markets

In a recent address, the Head of the UK's FCA, Ashley Alder, stressed the importance of global coordination to regulate the fast-evolving financial technology sector. During an event by the UK Mission to the European Union, Alder highlighted that innovation in fintech presents both opportunities and challenges, necessitating intelligent policy reactions from worldwide regulators.

Furthermore, the UK government has announced its intention to expedite the introduction of cryptocurrency regulations. Bim Afolami, the Economic Secretary to the Treasury, revealed at a cryptocurrency event in London that the government plans to implement regulations covering stablecoins and staking services by August. This move is part of the government's efforts to manage the growing digital currency space within a structured regulatory framework.

At the beginning of 2024, the FCA issued a market watch report highlighting an alarming trend of organized crime groups (OCGs) penetrating the equity markets through suspicious trading activities. The report calls for firms' heightened vigilance and proactive steps to counteract the risk of enabling such illegal operations.

It was noted that suspicious trading by OCG members, especially in products related to UK and internationally listed equities, constitutes a significant share of the suspicious trading volume in equity markets. The involvement of OCGs, defined under the Serious Crime Act 2015 as collaborations of three or more people engaging in criminal endeavors, underscores the complexity and breadth of regulatory challenges facing the financial sector.

The Financial Conduct Authority (FCA), the financial regulator in the UK, plans to publicize more information about its investigations into companies earlier in the process. According to one of the watchdog's representatives, more information will be presented today (Tuesday) in an industry consultation paper.

That may bring a major change to the UK's market transparency, as historically, the FCA has not commented on most investigations until penalties are announced. Furthermore, the UK wants to follow the US's lead and introduce incentives for whistleblowers.

The UK Financial Regulator Plans More Transparency on Investigations

Under the new approach that will be outlined in a consultation paper, the FCA aims to name companies under investigation once it opens a formal probe. The goal is to encourage witnesses and whistleblowers to come forward and deter misconduct in the industry. Legal restrictions limit naming individuals.

Therese Chambers, the Head of Enforcement at the FCA, told the Financial Times (FT) that more transparency will "enable firms to start putting their houses in order where they need to at an earlier date." Last year, the FCA issued only eight fines, the lowest level in a decade. The agency blames the Covid-19 pandemic and court backlogs.

Two new enforcement leaders: Chambers and Steve Smart plan to review whistleblower policies at the FCA. They may consider financial incentives for whistleblowers, a common practice in the US, but not currently used in the UK. Especially since such actions are supported by the new Director of the Serious Fraud Office (SFO), Nick Ephgrave.

"I am very happy that we look again at incentivization," Smart said to FT. "We'll talk to the SFO as to what they're thinking is and where they're looking to go on it, and then come to make a decision."

The consultation paper is set to mark a shift for the FCA. Under past leadership, probes were described as "open-minded explorations of an issue" rather than focused on outcomes. Currently, about 65% of FCA investigations close without penalties or charges.

The increased transparency aims to bolster the FCA's reputation as an enforcement agency and deter misconduct in the UK's large financial services industry. In 2023, the institution reached a new milestone by issuing 2,286 scam alerts on its public Warning List, marking an increase of 21% from the 1,882 alerts distributed in 2022.

Regulatory Hurdles in Fintech, Crypto, and Equities Markets

In a recent address, the Head of the UK's FCA, Ashley Alder, stressed the importance of global coordination to regulate the fast-evolving financial technology sector. During an event by the UK Mission to the European Union, Alder highlighted that innovation in fintech presents both opportunities and challenges, necessitating intelligent policy reactions from worldwide regulators.

Furthermore, the UK government has announced its intention to expedite the introduction of cryptocurrency regulations. Bim Afolami, the Economic Secretary to the Treasury, revealed at a cryptocurrency event in London that the government plans to implement regulations covering stablecoins and staking services by August. This move is part of the government's efforts to manage the growing digital currency space within a structured regulatory framework.

At the beginning of 2024, the FCA issued a market watch report highlighting an alarming trend of organized crime groups (OCGs) penetrating the equity markets through suspicious trading activities. The report calls for firms' heightened vigilance and proactive steps to counteract the risk of enabling such illegal operations.

It was noted that suspicious trading by OCG members, especially in products related to UK and internationally listed equities, constitutes a significant share of the suspicious trading volume in equity markets. The involvement of OCGs, defined under the Serious Crime Act 2015 as collaborations of three or more people engaging in criminal endeavors, underscores the complexity and breadth of regulatory challenges facing the financial sector.

About the Author: Damian Chmiel
Damian Chmiel
  • 1378 Articles
  • 28 Followers
About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
  • 1378 Articles
  • 28 Followers

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