A View From The Exchange: How not to regulate...

All press is good press - until it ends in a report about our financial regulator with the title "How not to regulate". However, since the "naming and shaming" saga has been through countless developments over the last year, it's no wonder that the House of Lords Financial Services Regulation Committee has adopted Daily Mail style tactics to get our attention.

For those that fell for the catchy title and then found themselves less keen on wading through a rather serious and considered report, we've included our take on the key points below.

Last Thursday (6 February 2025), the House of Lords Financial Services Regulation Committee published its report setting out its concerns with the FCA's enforcement transparency proposals as set out in CP24/2 (parts 1 and 2). Despite the back-pedalling we saw as part of the revised proposals published in November 2024, the Committee (as well as seemingly the entire market), remain concerned that the FCA has gone too far and it has resulted in a very public naming and shaming for the regulator.

Much of the messaging in the report remains consistent with what we have repeatedly heard from market participants for nearly 12 months. However the criticism of the regulator for continuing with these proposals seems to have stepped up a notch or two. Our key takeaways from the report are:

1. Think about what you've done - the Committee has recommended that the FCA carries out a "lessons learnt" review, setting out where it has gone wrong during this process and how it will prevent similar issues arising in the future.
2.  Don't run before you can walk - the Committee has suggested that the FCA "should consider whether it should focus its efforts on expediting its investigative processes to increase transparency before making substantial changes to the wider enforcement framework".
3. Remember who's boss - perhaps most cutting, the Committee has told the FCA that it should essentially get governmental sign-off on any future proposals before it goes public: "The FCA should engage with the Treasury over any future developments relating to its enforcement investigations proposals to ensure that they are aligned with the Government’s view of the secondary international competitiveness and growth objective".

How many more times does the FCA need to be criticised before its Board decides to cut its losses and focus on something more constructive? We await a decision from the Board of the FCA at the end of March and hope that the regulator has listened carefully to the feedback. For those keen to share their views on the FCA's revised proposals, you still have until next Monday (17 February) to respond to the consultation.