HomeNews & BlogMFA calls for the FCA to withdraw its name and shame proposal
Published
Type

MFA calls for the FCA to withdraw its name and shame proposal

Corbett: “The FCA’s proposal to publicly name firms before any wrongdoing is established will undermine the economic competitiveness of the UK.”

London, UK – MFA urged the FCA to withdraw its proposal to publicly name financial firms under investigation in a comment letter today. The letter, which highlights the devastating consequences of publicly shaming financial firms before an investigation is complete, is in response to FCA’s consultation paper 24/2 on the Enforcement Guide and Publicising Enforcement Investigations. 

MFA has deep concerns with the name and shame proposal. The proposal would fundamentally undermine the economic competitiveness of the UK and jeopardise the UK’s position as a global financial centre. Naming a firm before any facts have been established or conclusions have been drawn is unjust, particularly given that a majority of FCA investigations end with no action taken. Any firm FCA publicly names before the conclusion of an investigation would suffer severe harm—most importantly, to its reputation. These consequences may be irreversible even when the FCA eventually concludes that there was no wrongdoing. The consequences to alternative asset managers would include: 

  • A sudden increase in investor redemptions 
  • Material obstacles in attracting new investors and an erosion of relationships with consultants and other intermediaries  
  • Material obstacles in establishing new counterparty relationships 
  • An adverse impact on margin rates and other borrowings 
  • Negative impact on the stock price of publicly traded firms that are named   
  • Difficulties in staff recruitment and retention 

“The FCA’s proposal to publicly name firms before any wrongdoing is established will undermine the economic competitiveness of the UK,” said Bryan Corbett, MFA President and CEO. “The proposal introduces a host of new risks for alternative asset managers. As a result, many firms may leave or never enter the UK. This will harm markets, reduce investment choices for sophisticated investors, including pensions, and increase volatility, damaging the UK’s position as a global financial centre.”  

In addition to harming alternative asset managers, MFA’s comment letter notes that the proposal also harms issuers and introduces macroprudential risk: 

 “[T]he consequences of reputational damage on investment managers who represent a significant portion of the investor base of issuers with securities publicly traded in London and elsewhere in the world, as well as issuers of sovereign debt, is considerable. A key expectation of issuers is the ability of their long-term investor base to support them and a stable regulatory environment designed to minimise abrupt market events. MFA is concerned that the proposals would compromise the effective and orderly operation of markets, and strongly suggests that the FCA withdraw the proposals under the Consultation Paper in their entirety.”  

MFA’s comment letter stresses that the FCA’s proposal will erode confidence in the regulatory relationship:  

“MFA notes that the FCA itself has acknowledged that a clear confidentiality restriction encourages the free flow of information to the FCA. If the proactive self-reporting creates a risk that sensitive information regarding a preliminary investigation will be made public, firms may be less willing to continue to operate on the transparent and open basis which has been a key characteristic of the UK regulatory environment. This may limit the FCA’s ability to receive timely and unfiltered information from firms and may disincentivise firms from bringing information to the FCA’s attention as readily as firms might otherwise have done.” 

Read the full comment letter here. 

###

About the global alternative asset management industry

The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of £4.5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.

About MFA

Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over £2.5 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.

Recent News & Blog