IUA Warns Publication of Unresolved Regulatory Investigations Could Unfairly Damage Industry Reputations

The IUA has strongly opposed plans to publish details of future regulatory investigations before they reach their conclusion...

Under proposals announced by the Financial Conduct Authority details of ongoing enquiries into alleged misconduct would be made publicly available. Such action could lead to market speculation, cause irreparable reputational damage and drive firms to financial hardship, even though they may subsequently be found innocent of any charges.

The IUA has warned that premature publication of investigations may create an unwarranted perception of systemic problems within the financial services industry, impacting other companies not subject to enquiries. It may also increase the cost and restrict the availability of directors and officers insurance for firms regulated by the Financial Conduct Authority.

Helen Dalziel, IUA Director of Public Policy, said: “The concept of ‘innocent until proven guilty’ is a fundamental doctrine of criminal law and the mere association with an ongoing investigation could cause substantial harm to a firm’s standing in the market.

“If individuals are named and shamed before the outcome of an investigation is determined, there is a real danger that the possibility of a fair trial by an impartial tribunal would be impeded. Early disclosure of unverified facts and negative media coverage could create a prejudicial environment with guilt presumed.

“Publishing any investigations that have not been fairly concluded is only likely to erode, rather than encourage, trust and confidence in financial services.”

The IUA has submitted a formal response on behalf of its member companies to the Financial Conduct Authority’s consultation exercise ‘CP24/2: Our Enforcement Guide and publicising enforcement investigations - a new approach’. Proposals put forward by the regulator are said to be disproportionate to the potential harm it is seeking to mitigate. There is no evidence of any formal assessment being carried out of the potential impacts on reputation or market integrity.

The IUA’s response suggests that many investigations do not actually lead to any enforcement action. A number of powers are already available to the authority that its own annual report illustrates are providing effective enforcement of regulations.