The government has confirmed that the Financial Conduct Authority will have the power to reveal the identities of firms it is investigating before any enforcement action has been taken.
In its latest consultation paper published last week, A New Approach to Financial Regulation: The Blueprint For Reform, the government says this will support the shift towards a more open and transparent regulatory approach when the Financial Services Authority is disbanded in 2012.
Despite the Association of Independent Financial Advisers expressing concern that the rule marks a worrying shift towards a guilty until proven innocent culture, the government has pressed ahead with the proposal as outlined in its February regulatory paper.
The latest paper acknowledges this proposal prompted a negative reaction from industry on the basis that it could cause significant reputational damage to firms.
But it says: “Nevertheless, the government remains committed to taking forward this power as part of its wider commitment to transparency as a regulatory tool.
“Transparency will mean consumers will be alerted earlier to proposed disciplinary action and firms will have a clearer sense of what is expected of them and what is deemed unacceptable behaviour.”
The paper also points out the disclosure is not a duty and the FCA can consider each case on its merits.