FCA enforcement; new light through old windows?
On 24 September 2024, Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the Financial Conduct Authority (“FCA”), used a speech delivered at the Association of Financial Markets in Europe (“AFME”) Annual European Compliance and Legal Conference to announce and explain changes to the FCA’s approach towards enforcement action.
The key messages within the speech were as follows:
Continued focus on financial crime
Reducing and preventing financial crime will remain a focus of the FCA’s strategy into 2025 (and probably beyond). Ms Chambers referred to the FCA’s charges brought against the 9 “fininfluencers” for promoting unregulated financial products without authorisation that we reported on earlier this year ( 'Finfluencer' trial dates set (irwinmitchell.com) and 'Influencing' gone too far? (irwinmitchell.com)). She also reported that over 45 people are currently facing FCA criminal proceedings for offences such as fraud, insider dealing and money laundering.
Collaboration with firms and enforcement agencies
As well as working with firms (especially banks) in areas such as the detection of money laundering, the FCA will continue to collaborate with foreign regulators to protect the integrity of the UK financial markets and protect customers. Ms Chambers referred to the work undertaken with the French regulator, the AMF, to censure H20 LLP and secure redress for customers of €250 million that we reported on back in July ( H2O Asset Management to pay €250 Million to investors following FCA investigation (irwinmitchell.com))
The growing role of data and technology
The FCA’s approach to supervision and enforcement will be increasingly data and tech driven so as to enable it to quickly respond to those who seek to exploit UK financial markets. The Market Oversight Team will continue to use sophisticated digital tools to monitor the market and detect misconduct in real time. The FCA will look to improve the capabilities of the Cyber Forensic Unit to enable it to handle ever more complex forensic tasks.
Increased pace and focus of investigations
The regulator is committed to conducting investigations at a greater pace, streamlining its caseload and focusing on investigations that are better aligned to its strategic priorities. That means identifying cases where it believes that there may be conduct creating the greatest risk of harm and where an investigation is most likely to drive the greatest deterrence. So, we can expect to see the FCA opening fewer investigations, but there will be a greater number of outcomes with more impact on punishing wrongdoers, protecting customers and deterring others from breaching the rules.
Transparency
In February 2024, the FCA announced that it was consulting on proposals to publicly announce the opening of an enforcement investigation, identifying the subject of the investigation and publishing updates “as appropriate”. The FCA said that publicity decisions would be taken and informed according to a new “public interest framework” (.Proposed FCA Enforcement Changes – is too much information a bad thing? (irwinmitchell.com))
To say that this was controversial would be an understatement as firms warned of the serious impact on the international competitiveness of UK financial services and the economy. Meetings were sought by furious firms with the (then) Chancellor Jeremy Hunt to vocalise concerns.
Not much has been heard from the FCA on this score until now. But what is clear from Ms Chambers’ speech is that the FCA has not abandoned the idea of publicising investigations (she noted that the case for more transparency remains strong) although the FCA is to tweak the original proposals in recognition of, and by way of response to, the fierce reaction and will not rush into things after it first announced them. What the FCA has said is that it will consult with stakeholders further and will not rush into any decisions.
Comment
Garon Anthony, Financial Service Partner comments:
“Overall, I did not hear very much in the speech that was especially new and Ms Chambers reiterated many enforcement messages that we have heard before, especially on financial crime, increased use of data and tech and quicker, more focused investigations.
However, from an industry point of view it is very concerning that the idea of the FCA publicly announcing the opening of an enforcement investigation has not gone away. I would encourage all firms to continue to engage with the FCA and press home their concerns about this proposal when the FCA publishes more details about its revised proposals later this year.
I do not think the transparency proposal (in whatever form it emerges in) will do anything to enhance the competitiveness of the UK financial markets. Indeed, it could well be an active disincentive to potential overseas’ newcomers who might be looking set up in the UK and join the industry.”
