Protecting the innocent

Recently the spotlight has been on the FCA’s plans to “name and shame” organisations under investigation – there are many aspects to this, so bear with me as I explain why we are against this.

Firstly, quite simply, we disagree with the FCA’s proposals, and we believe they fail to adequately recognise the unintended consequences for our sector if they press ahead.

We absolutely support an efficient enforcement process, but the suggested approach could seriously affect confidence in the sector among consumers, shareholders, businesses, employees and, not least, potential investors in the UK financial sector.

Surely then this runs contrary to the FCA’s own secondary objective on competitiveness and growth.

In addition, the absence of a cost benefit analysis suggests an insufficient regard for the principle of proportionality which was, in fact, referenced by Lord Forsyth (Chair, Financial Services Regulation Committee) in a letter to FCA CEO, Nikhil Rathi, which shared the Committee’s concern about the lack of a proper cost-benefit analysis associated with the proposals (of course financial cost is tied heavily to the wider costs this could create).

Secondly, and by the FCA’s own admission, 67% of all investigations conclude with no enforcement action required.  If these proposals were to be implemented, there could be untold damage to the reputation of the firms named.  How unjust might this be for the more than two thirds of firms named that are found to have had no case to answer in the first place? In insurance broking reputation and trust are everything, and as the adage goes “it takes a lifetime to build a reputation but only one moment to lose it”.  It seems improper to create a system which almost guarantees reputational loss (and the very real financial consequences this can have) with seemingly no tangible benefit.

Thirdly, we unreservedly support the principle of creating a safe framework for whistleblowers to come forward, and to pursue better outcomes for consumers, but these proposals seem to deliver on neither of these principles.  Instead, they could destabilise the market, leading to less choice, poorer service and therefore poorer outcomes.

Finally, with the current Senior Managers Certification Regime in mind, should a firm be publicly mentioned, it is entirely possible to identify accountable individuals either on the FCA register or company website and therefore put them at risk of unnecessary negative media and social media attention.

BIBA has responded strongly to the proposals which are available for our members to read. 

As you would expect, we are of course focused on the impact these proposals could have on our members.  But I think it is also important to recognise the deep concerns felt across the financial services sector, as well as the political concerns raised by no less than the Chancellor of the Exchequer, the Secretary of State for Business and Trade, the City Minister and the Chair of the Financial Services Regulation Committee. In the last few days, we met with the Chief of Staff of the Chancellor of the Exchequer who acknowledged and accepted the points we made.

Simply put these proposals do not appear have a positive benefit for consumers, clients, or the market they are intended for, and we will continue to raise our questions and concerns with the regulator and Government.

We urge everyone in the sector to do the same.