Emma RadmoreA firm (not yet named) has lost its appeal against an FCA decision to publicise the fact that it is under investigation and release the firm’s name in doing so. The judge granted permission for judicial review of the decision but dismissed the substantive claim.
The FCA had decided to investigate the firm and, initially, the FCA decision-maker received a memorandum from members of the case team which recommended making an anonymised announcement. Following internal discussion, the case team wrote a second memorandum which now recommended making a “naming announcement”. The decision-maker accepted the recommendation for the reasons the memorandum set out, and the FCA wrote to the firm to tell it of its decision, giving the form 24 hours’ notice as the FCA rules require. The major reason for the announcement was stated to be the need to alert customers that they may wish to “consider their options by reference to aspects of the way in which they may have come to be the claimant’s customers”. The case team needed, however, to think about the extent to which the issue could be an issue for all customers within the relevant sector, and not just those of the firm under investigation. The judge thought the team did do this in a reasonable way. The regulator thought that an anonymised announcement, or a letter from the firm to its customers that did not disclose the investigation, would not leave the customers suitably protected.
The firm promptly started a legal challenge and the FCA agreed to defer its announcement pending a decision from the judicial review Court.
The firm argued that the FCA decision maker had “materially misinterpreted” the Enforcement Guide, or had reached a decision that was unreasonable as to outcome or as to its reasoning process. It was for the Court to consider whether the decision was unreasonable in that it was outside the range of reasonable decisions open to the decision-maker or there was a demonstrable flaw in the reasoning leading to it. The Court determined there was neither, and so dismissed the claim. The judge was satisfied that the grounds for judicial review did cross the threshold of arguability with a reasonable prospect of success and therefore the review was allowed – although the substantive claim was dismissed because the judge found the FCA’s decision to be lawful and reasonable.
The reasoning in the memorandum had explained why the circumstances were exceptional and why there should be a naming announcement, while also noting the FCA could properly make the announcement on an anonymised basis.
The judge also refused permission to appeal, and the FCA undertook not to publish the announcement until after the firm could apply to seek permission for a further appeal. That period expired on 23 October.