The end of the road for (most of) the FCA's transparency proposals

What remains of the FCA’s proposals?

The FCA has decided to discontinue the most controversial aspect of its proposals: the introduction of a public interest test to determine if the FCA should announce investigations into regulated firms.

While the public interest test has been shelved, the FCA's proposals are not entirely off the table. The FCA plans to move forward with the following:

• Reactive confirmation of investigations: The FCA will confirm investigations that are already in the public domain.

• Public notifications: These will focus on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter.

• Anonymised details: The FCA will publish more detailed information about issues under investigation, but on an anonymised basis.

The FCA has committed to taking these proposals forward and is aiming to publish its final policy by the end of June 2025.

As the FCA moves forward with its stripped-back proposals, the FCA’s approach to determining if an investigation is in the public domain will be crucial, as this could lead to the FCA itself confirming the existence of that investigation. In our view, the bar for an investigation being in the public domain should be quite high – i.e. where a firm specifically confirms that they are the subject of an FCA enforcement investigation, rather than relying on disclosures commonly included in firms’ annual reports about general ongoing and/or future regulatory engagement, reviews and oversight.

The existing (and continuing) ‘exceptional circumstances’ test

While the FCA is no longer intending to introduce a public interest test to determine if the FCA should announce investigations into regulated firms, it will still have its discretion to publicly announce investigations “in exceptional circumstances”. 

What may amount to “exceptional circumstances” in this context can be found in the FCA’s Enforcement Guide (EG 6.1.3) – namely, if the FCA in exceptional circumstances considers that a public announcement about an investigation would be desirable to 

• maintain public confidence in the financial system or the market; 

• protect consumers or investors; 

• prevent widespread malpractice; 

• help the investigation itself, for example by bringing forward witnesses; or

• maintain the smooth operation of the market.

In this same part of the Enforcement Guide, the FCA says that exceptional circumstances may arise “where the matters under investigation have become the subject of public concern, speculation or rumour. In this case it may be desirable for the FCA to make public the fact of its investigation in order to allay concern, or contain the speculation or rumour”. It also states that, in deciding whether to announce an investigation, “the FCA will consider the potential prejudice that it believes may be caused to any persons who are, or who are likely to be, a subject of the investigation”.

As the FCA has stated on a number of occasions, it has relied on “exceptional circumstances” to publicly announce investigations in only a handful of cases. However, in light of the decision to discontinue its new proposals, it will be interesting to see whether the FCA starts to use and, potentially, test the boundaries of this “exceptional circumstances” test.