Laura WilesFollowing considerable sector backlash over – and the FCA’s subsequent revision of – proposals to introduce increase transparency in enforcement with a ‘public interest’ test, the FCA has published an updated Enforcement Guide.
As previously announced, the FCA has retained its existing ‘exceptional circumstances’ test as the principal method for deciding whether to publicise investigations into regulated and listed firms. It has, however, removed that test in three scenarios in which it received broad support for increased transparency:
- Where the FCA is 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; and
- Anonymised announcements, not naming or identifying the subject of the investigation, where it would be helpful to educate people on the types of misconduct the FCA is investigating.
Otherwise, the FCA has proceeded with the majority of its proposed changes to the Guide, many of which aimed to streamline the document and reduce repetition. As a result of the amendments, the Guide has now been reduced by around 250 pages.
As FSMA does not require the FCA to have an Enforcement Guide, it is similarly not subject to FSMA consultation requirement in respect of changes to it. The FCA therefore proposed that in future it would only consult where statutorily required or where it deemed it necessary to do so. While respondents acknowledged the lack of legal consultation obligation, most cited concerns around transparency, with many suggesting that the FCA should always consult where material or substantive changes are proposed to the Guide. Some also noted the lack clear criteria for determining where a consultation might be ‘necessary’, and potential interpretation disagreements as to what the FCA and firms might consider a ‘substantive’ change. The FCA has therefore retained its current practice for consultations on the Guide.
Other changes included:
- Clarifying the FCA’s approach to legal adviser attendance at compelled interviews, namely that it will have the power to refuse attendance of an adviser where it may prejudice the investigation;
- Moving content to the SUP manual, including introducing a new chapter 6B on the FCA’s powers to vary or cancel a firm’s Part 4A permission; and
- Removing reference to private warnings as an enforcement tool. The FCA has not used private warnings for some time, and notes that they were never intended to be a determination on whether a recipient has breached relevant rules. It also stressed that this change does not affect the types of cases referred for investigation, nor that the FCA is slower to resolve or close investigations where appropriate.
The updated Enforcement Guide comes into effect on 3 June 2025, so the changes will only apply to investigations launched on or after this point.