The Financial Conduct Authority has come under enormous pressure in recent weeks as an army of City lawyers has been galvanised to oppose the regulator's plans to name companies under investigation.
The lawyers' argument is that naming firms at the outset of an investigation will ruin their clients' reputations, before anything is concluded, and that it takes many years to reach a final decision. They were joined this week by chancellor Jeremy Hunt, who asked the regulator to 're-look at their decision'.
But the FCA, for its part, is being robust in its defence, claiming it is a consultation, that it needs to do something to increase transparency, and that this is part of a wider plan to speed up the enforcement process, which is currently taking too long.
Questions remain, however, over whether this is in fact the best way to go, and if there are other means of improving enforcement.
A prime example of a case taking a long time is with Neil Woodford and Woodford Investment Management. His fund, WEIF, was suspended in 2019, but it was only this February, five years later, that the regulator issued a warning notice against Woodford and Woodford Investment Management. Woodford has rejected the finding.
Claire Lipworth, partner in litigation, arbitration and employment at Hogan Lovells, says: "There's definitely been a problem with how long [FCA investigations have] taken.
"There has certainly been concern about how long they've taken to make a decision and that's partly why this consultation is so problematic. There would be a fanfare and then potentially nothing would happen."
In a letter to the House of Lords' Financial Services Regulation Committee, the FCA says the naming proposals are part of "our ambition to increase the effectiveness of our enforcement work by increasing the pace and focus of our investigations. We are committed to reducing the timelines of our investigations".
Taking time
However, regulation consultants disagree that naming companies will help speed up their investigations. Compliance consultant Adam Samuel says: "[It will not help] in the slightest. The FCA doesn't need information from third parties for its investigations. Most of the material for enforcement can be found within the firm being investigated."
Katie Stephen, co-head of the contentious financial services group at Norton Rose Fulbright, agrees: "It is difficult to see how naming firms will speed up the enforcement process. The FCA might point to the potential for publicity to encourage whistleblowers and other witnesses to come forward.
"However, some may be deterred by the limelight that publicity around an investigation could attract and the additional work created for the FCA of sifting the wheat from the inevitable chaff does not seem likely to contribute to a faster paced process. Nor do investigations which have been made public in the past appear to have concluded particularly quickly."
