All stakeholders would concur in the benefits of reducing the number of years it takes to conclude many enforcement cases, but do the proposed ends justify the means? Will the proof be in the pudding? Currently, other than in exceptional circumstances, the FCA only publishes information about enforcement investigations when these lead to outcomes following due process such as the issue of statutory notices imposing sanctions, prohibitions and requirements. However the prospect is that FCA processes in relation to enforcement investigations prior to publicity are about to become half-baked, or indeed rare.

What is on the menu?

In CP24/2 the FCA sets out its proposals for a revised Enforcement Guide (EG). Aside from the proposed changes to EG dealing with overlap with the FCA’s Decision Procedure and Penalties Manual (DEPP) or to address repetition of legislative provisions, the FCA proposes to clarify its approach to the attendance of legal advisors at a compelled interview of a subject under investigation where there may be a conflict of interest, that decisions to apply to the court to commence civil or criminal proceedings will be made by an Executive Director or Director in Enforcement, and that private warnings shall no longer be used as an enforcement tool.

However, by far the most headline grabbing and controversial proposal concerns the new approach to publicising enforcement investigations.

• It will apply to all investigations commenced by way of statutory appointment of investigators (including those ongoing when the new policy is introduced).
• An announcement concerning the opening of an enforcement investigation will include the identity of the subject of the investigation, and will be followed by further updates, where it is considered in the public interest to do so.

A pinch of irony is noted in the lack of transparency afforded by the FCA’s omission to provide a full markup of the proposed changes to EG.

What are the key ingredients of the public interest framework?

The recipe includes six possible ingredients, although only one is required. An announcement will be in the public interest if it will likely:

1. Enable the interests of potentially affected customers, or consumers or investors more generally, to be protected.

2. Help the FCA’s investigation, for example by encouraging potential witnesses or whistleblowers to come forward.

3. Address public concern or speculation, including by correcting information already in the public domain.

4. Provide reassurance that the FCA is taking appropriate action.

5. Deter future breaches of FCA rules or other requirements or prohibitions that the FCA is responsible for enforcing or

6. Otherwise advance one or more of our statutory objectives, including protecting and enhancing the integrity of the UK financial system.

Whilst the desired outcomes are laudable, it is far from clear that the proposed publicity would achieve them or would be a fair and proportionate way to achieve them. The FCA expressly wholly excludes the impact on investigation subjects as a factor to be taken into account. The fact that announcing an investigation does not mean that the FCA has decided whether there has been misconduct or breaches of its requirements is a nuance that is likely to get lost in any media coverage. The proposed approach to publicity is hardly conducive to meeting the need expressed by the FCA for “industry and regulators pulling together to stop opportunistic market abuse and its corrosive effects”.

Justice is a dish best served hot

In a recent related speech, the FCA noted that it must tackle the delay between misconduct occurring and penalty being imposed if it is to boost confidence in our markets, and that the longer it takes for outcomes to be determined or justice served the longer it takes for the FCA to send important signals to the markets the FCA oversees about what it considers to be serious misconduct. Would publicity really speed up outcomes, or deliver justice? In its press release the FCA noted that “Greater transparency will also drive greater accountability for us as an enforcement agency”. Surely the FCA was not suggesting that it had been operating less than diligently on its investigations because it had not been subject to direct public scrutiny? Surely, more timely signals to markets could be delivered through existing means of communication, such as via Dear CEO letters and Market Watch newsletters which are carefully scrutinized by industry?

It's not possible to have your cake and eat it

The FCA also noted in its speech that “While delivering justice in specific cases is vital, what is even more important is the overall impact of our strategy: is our enforcement strategy acting as the ultimate deterrent?” Whilst the FCA has stated that it will consider its approach to publicity on a case-by-case basis, in practice, if the FCA were to publicise a large number of investigations which it then closed with no enforcement outcome that would over time seriously undermine its objective of impactful deterrence.