New Enforcement Code From the FCA Went Live This Week

Just an FYI from the FCA for all you compliance people, although we are sure you’re all over it;

We have published the final version of our streamlined and updated Financial Conduct Authority Enforcement Guide.

As previously announced, we have retained the ‘exceptional circumstances’ test for announcing investigations into regulated and listed firms. In addition, we have identified three situations where there was broad support for increased transparency:

• Where we’re investigating suspected unauthorised financial services, or a suspected offence relating to unregulated activity, and an announcement will warn consumers or investors or help the investigation.
• Where the fact of the investigation has been made public by the subject, an affiliated company or a regulatory body, government or public body.
• Anonymised announcements, not naming or identifying the subject of the investigation, where it would be helpful to educate people on the types of misconduct we are investigating.

These changes will only apply to investigations launched on or after today.

Alongside this, we will continue to improve the pace and focus of our investigations, increasing the impact of our work for the benefit of consumers and markets, and therefore the wider economy. Five recent investigations closed with a public outcome in less than 16 months, compared to an average length of 42 months in 2023/24.

We have made other changes to the Enforcement Guide to streamline the content and reduce duplication, reducing it by over 250 pages. We have also confirmed that we will continue to consult on future changes to the Enforcement Guide.

The new Enforcement Guide will come into force today (Tuesday).

COMMENT

Commenting on the FCA’s updated Enforcement Guide, published today, Imogen Makin, counsel at WilmerHale, said:

“The FCA’s confirmation in PS25/5 that it will not proceed with proposals to introduce a public interest test for announcing investigations at an early stage will be welcomed by the financial services industry. In the policy statement published this morning, the FCA formally confirmed retention of the current ‘exceptional circumstances’ test with three additions to the circumstances in which investigations will be announced:

1. Where suspected unauthorised financial services or a suspected offence relating to unregulated activity are being investigated and an announcement will warn consumers, investors or help the investigation;
2. Where the investigation has been publicly disclosed by the subject, an affiliated company, regulatory body, government or public body; and
3. Anonymised announcements, where it would assist in educating people on the misconduct being investigated by the FCA.

“The changes will only apply to investigations launched on or after today, another welcome revision to the initial proposals. The updated policy would seem to allow for the announcement of an investigation by the FCA where the subject has communicated the fact of an investigation in publicly available accounts, for example. As a result, financial services firms will need to take extra care when drafting disclosures and prepare for a potential increase in the media, customer and stakeholder attention that might follow an FCA announcement.

“Anonymised announcements will need to be carefully drafted by the FCA and, potentially, aggregated to ensure that investigation subjects are not identifiable or that particular sub-sectors in financial services are not unnecessarily de-stabilised. Provided that announcements are appropriately anonymised, they could be useful tools to assist firms’ understanding of the FCA’s focus and the types of concern that are likely to tip a firm into enforcement and, therefore, encourage compliance. Firms should ensure that they monitor the FCA’s announcements going forwards to gain valuable insights into the regulator’s mindset.”