Naming and shaming firms under investigation by the Financial Conduct Authority could encourage firms to settle sooner, according to a compliance expert.
Rob Mason, head of regulatory intelligence at Global Relay, said the regulator’s plans to name firms under investigation at an earlier stage could work to reduce lengthy legal battles.
He said: “Let's just take an example of a systems and controls failure, which is binary, everyone knows something has gone wrong, it is just the degree of how bad that is and whether there's going to be a sanction at the end of it.
“By threatening to name, what the FCA is doing is encouraging firms to settle so they're not exposed to the media for long periods of time.
“They then don't fill the lawyer's pockets, on both sides. If we see settlement sooner, a firm can move forward and the regulator can redirect their resources to other risks.”
The regulator said naming firms at an earlier stage could increase transparency and deter wrongdoing in the first place.
The consultation on the plans closed on April 30 but the proposal has already received criticism, including concerns about people being named then found to have done no wrong.
This includes backlash from the House of Lords financial services regulation committee, which is unhappy the regulator did not pause its plans.
At the start of May, FCA chairperson, Ashley Alder, said the regulator was not expecting the criticism it had received on the 'name and shame' proposals.
Alder told the Treasury committee: “In truth at the time the proposals were put out, we were not expecting such a stern reaction from the industry.”
Mason said some of the reaction to the proposals has been “extreme” and did not believe the FCA would name people without proper consideration.
“The idea that the FCA is going to just willy nilly name people where they've got a spurious suspicion is a little bit extreme,” said Mason.
“I don't think it is going to happen quite like that."
However, Mason said a compromise to the conflicting views could be the FCA describing the behaviours they have identified without naming the firms.
He said: “That allows the regulator to deliver a message around the behaviour so other firms have an opportunity to go, ‘oh we've got the same risk’, so they are sending the message, which is what these enforcement outcomes are essentially trying to do.”
tara.o'connor@ft.com
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