FCA’s updated Enforcement Guide brings clarity

The Financial Conduct Authority (FCA) has published an updated Enforcement Guide today, which has generated significant commentary from industry experts. Imogen Makin, counsel at WilmerHale, shared insights on the implications of the guidance, particularly regarding the FCA’s decision not to introduce a public interest test for announcing investigations at an early stage. “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.”

The policy statement brought forth today formally upholds the existing ‘exceptional circumstances’ test while adding three new conditions under which investigations will be announced. The first circumstance is where there are suspicions of unauthorised financial services or a suspected offence related to unregulated activity, aimed at warning consumers and investors or aiding the investigation. The second relates to cases where the investigation has been disclosed publicly by the subject or an affiliated entity, regulatory body, government, or public body. The final addition pertains to anonymised announcements that could help educate the public on misconduct being investigated by the FCA.

Makin noted, “The changes will only apply to investigations launched on or after today, another welcome revision to the initial proposals.” This indicates that the current guidelines aim to facilitate greater transparency while protecting the integrity of investigations. An essential aspect of this update is that it permits the FCA to announce investigations where the subject has already disclosed details in publicly available accounts. She cautioned that financial services firms must exercise caution when drafting disclosures and brace for heightened media and stakeholder scrutiny following any announcements from the FCA.

Furthermore, the requirement for carefully crafted anonymised announcements could serve to inform firms about the FCA's focus areas and concerns. “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.” Makin emphasised that if done correctly, these announcements could empower firms to better understand the regulatory landscape, encouraging compliance. Thus, monitoring the FCA’s announcements will be imperative for firms seeking insights into the mindset of the regulator going forward.