UK markets watchdog recasts "naming and shaming" plan to defuse backlash
Revised FCA proposals consider impact on businesses, markets
Companies offered more time to contest publication plans
Original proposals sparked industry outcry
"We have heard the strength of feedback" -FCA
Adds industry, legal reaction paragraphs 7, 8, 9, 14 and 15, details
By Kirstin Ridley
LONDON, Nov 28 (Reuters) -Britain's markets watchdog on Thursday re-cast proposals to publicly name companies under investigation, in its latest effort to defuse a fierce backlash against plans that have been labelled misjudged and harmful to London's competitiveness.
The Financial Conduct Authority (FCA) said significant changes to its original proposals included plans to explicitly consider the potential impact on businesses, as it rowed back from an original focus on deterring wrongdoing, boosting transparency and encouraging whistleblowing.
The regulator, which is requesting feedback by Feb. 17, has rejected criticism from some lawmakers and lawyers that it is sidelining a new duty to promote the industry's international competitiveness with unnecessary proposals that are designed to make it look more effective.
"We have heard the strength of feedback to our original proposals and we are making changes as a result," said Therese Chambers, the FCA's joint head of enforcement and market oversight.
Reuters reported in June that senior FCA officials started making concessions during a charm offensive with industry shortly after the publication of its original proposals in February triggered an outcry.
Lawmakers, industry bodies and lawyers have said that announcing investigations before innocence or guilt was established risked dealing irreparable and unjustified damage to companies and the finance industry, which accounts for more than 12% of UK tax receipts.
David Postings, chief executive of bank lobby group UK Finance, welcomed revised proposals that include an increased notice period for companies to contest publication plans.
But Nathan Willmott, a lawyer at Ashurst, said the proposals remained "unnecessary and problematic".
"The real reason for these proposals is to enable the FCA to obtain 'public outcomes' against firms at an early stage ...," he said. "That remains a deeply unfair approach."
RETREAT?
The row hinges in part on the FCA's plan to apply a looser "public interest" test to naming corporate suspects, which critics say was ill-defined. Currently, companies under investigation are named only in "exceptional circumstances".
As part of the public interest test, the FCA now proposes to consider the potential for an announcement to seriously disrupt public confidence in the financial system or market.
It has already proposed giving firms 10 days' notice ahead of any announcement - rather than the single day originally suggested - and on Thursday offered a further 48 hours to challenge any final FCA decision to publish.
The FCA has suggested its new proposals could double the number of investigations into regulated firms that it typically announces - albeit from one or two per year - allowing it to warn more consumers about impending action.
But Rhys Corbett, a lawyer at Bryan Cave Leighton Paisner, said the latest consultation marked a significant retreat.
"It appears that the FCA ... has now, in the face of widespread legitimate industry concern, retreated back to a position that is not very far away from its existing policy of making early announcements of investigations in 'exceptional circumstances'," he said.
The FCA board will decide whether to press ahead with the proposals in the first quarter of 2025.
Reporting by Kirstin Ridley; Editing by Susan Fenton
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