PIMFA, the trade association for wealth management, investment services and the financial advice and planning industry, has joined with 15 other financial services trade associations, including UK Finance, TheCityUK, the Association of British Insurers (ABI), and many others in writing to the Chancellor of the Exchequer, Jeremy Hunt, calling on him to intervene over the Financial Conduct Authority’s (FCA) proposals to publicise enforcement investigations of firms.
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At present, the regulator only publicises enforcement action if a financial services firm is found guilty of misconduct or to have breached the FCA’s regulations. The FCA’s proposals to publicise enforcement investigations therefore represent a worrying development.
Liz Field, Chief Executive of PIMFA, commented: “It is very difficult to see how the FCA’s proposals to publicise enforcement investigations will be of benefit to either consumer confidence and trust in financial services or to the integrity of the market overall.
“The FCA’s argument that an enforcement investigation does not automatically mean that there has been misconduct or breaches of its requirements seem to us to show a degree of naivety around the way the real-world works. An announcement of an investigation will lead many to believe there is no smoke without fire and assume guilt on the part of the firm being investigated, particularly if this is fuelled by press speculation.
“For smaller firms, the impact could be devastating, with clients leaving in droves despite there being no immediate evidence of actual wrongdoing on the part of the firm. Larger listed firms will almost certainly be subject to significant market volatility because of shareholder action or could see significant outflows of assets – potentially leaving them hollowed out.
“We cannot understand how these proposals support the FCA’s role of promoting UK competitiveness and economic growth, while ensuring consumer confidence through the way in which it supervises and regulates the industry. The proposals appear to contradict the former and do little to promote the latter.”
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