Does this mean the FCA is listening to you on overregulation?

The Financial Conduct Authority (FCA) has decided not to go ahead with planned ‘name and shame’ rules and has dropped two other flagship policies.  What does this mean for accusations of the regulator’s ‘scope creep’?

Financial advisers’ biggest bug bear? Overregulation. (Perhaps joint first with slow response times from life and pensions companies). It seems the regulator has finally taken note.

Plans to ‘name and shame’ UK firms under investigation have been dropped. The FCA had intended to apply a new public interest test for announcing investigations into regulated firms. But “given the lack of consensus” over the plans has decided to shelve them.  

The regulator will take forward other proposals:

• reactively confirming investigations already in the public domain;  

• public notifications which focus on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter;  

• and publishing greater detail of issues under investigation on an anonymous basis.  

At the same time planned diversity and inclusion (D&I) data collection rules have been scrapped. Explaining why, the FCA said they want to “avoid additional burdens on firms at this time”. Instead support will be given to voluntary industry initiatives aimed at boosting D&I in the financial sector.

The regulator has also paused work to tackle non-financial misconduct, saying it is “important that our approach is proportionate and aligned with planned legislation, so we are taking some further time to get this right”.  

Next steps on all of the above will be set out by the end of June this year.

A quick look across the trade press and it is clear financial advisers have welcomed the change of direction from the regulator, especially smaller firms which would have in particular struggled to take on new reporting rules around diversity and inclusion.

Law firm Pinsent Mason have also weighed in to support the U-turn. Sébastien Ferrière of Pinsent Masons said: “The FCA’s decision to drop the ‘naming and shaming’ approach is a welcome one, particularly in light of the prevailing economic growth and international competitiveness agenda of the government.”

The UK government is aiming to reduce regulation to help stimulate economic growth. While the FCA is an independent body, it seems it is falling in line with this agenda.  

For advisers there is an even greater hope that the regulator is finally listening to their concerns about being overregulated and the costs in time and money this creates.  

In a speech in October 2024, Nick Hulme, head of department, advisers, wealth and pensions, consumer investments at the FCA, said he wanted to “give firms (from sole traders right up to the networks and nationals) the flexibility to innovate in service of their clients that fits their size and client base more easily”.

While the weight of the introduction of the Consumer Duty is still being felt, these are the most promising indications from the FCA in some time that the weight of regulation is to be fairly, rather than overly-onerously, apportioned.  

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