PIMFA raises serious concerns about FCA’s enforcement proposals

30 April 2024

PIMFA raises serious concerns about FCA’s enforcement proposals

• Public announcements of enforcement action could be very damaging.

PIMFA, the trade association for wealth management, investment services and the financial advice and planning industry, has today (30 April 2024) again expressed serious concerns about the Financial Conduct Authority’s (FCA) proposals to make public enforcement investigations of financial services firms.

Responding to the FCA’s consultation paper: CP24/2: Our Enforcement Guide and publicising enforcement investigations – a new approach, PIMFA has raised a number of concerns around the potential negative impact of making enforcement investigations public at the start of the process.

PIMFA supports the principle of an empowered, assertive, and proactive regulator. But we share the concerns expressed across the financial services industry about the likely negative impacts the proposal to publicise the name of firms at the start of an investigation will have on the named firms and on the functioning of markets.

There is a very real danger the proposals will damage the competitiveness of the UK’s financial services sector as investors are driven away, with the City’s attractiveness as a place to come to do business also diminished.

In considering its approach, the FCA must surely be aware that larger listed firms subject to public enforcement activity will almost certainly be subject to significant market volatility because of shareholder action.

Beyond the financial implications, consideration should be given to the reputational impact of an investigation announcement on the firm, its staff, and its customers particularly when exacerbated by press speculation.

The FCA’s argument that an investigation does not automatically mean that there has been misconduct or breaches of the requirements shows a degree of naivety around the way the real-world works.

In fact, the announcement of an investigation will lead many to believe that there is no smoke without fire and so guilt on the part of the firm will be assumed immediately.

For smaller firms, the impact of such a public announcement of an investigation could be devastating with clients leaving such firms in their droves despite there being no immediate evidence of actual wrongdoing.

Alexandra Roberts, Head of Regulatory Policy and Compliance at PIMFA, commented: “PIMFA believes in the principle of a tough regulator but we are deeply concerned about the negative impacts these proposals may have.

“We believe these proposals could lead to a significant erosion over time in consumer confidence, and trust, in financial services, as well as to investor confidence. Public announcements of enforcement investigations might also lead to significant outflows of assets for many larger firms – potentially leaving them hollowed out – and sharp falls in the share price of those firms that are listed on the stock market.

“We cannot understand how these proposals support the FCA’s role of promoting UK competitiveness and economic growth, while ensuring consumer confidence through the way in which it supervises and regulates the industry. The proposals appear to contradict the former and do little for the latter.”

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Notes for Editors

About PIMFA – the Personal Investment Management & Financial Advice Association

• PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
• In May 2023 PIMFA was named as one of the Best Places in the UK to work by The Sunday Times.
• The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
• PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
• PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments. 
• PIMFA has made numerous recommendations to the FCA regarding the Future of Advice, Future of Supervision and the FSCS levy – read more.
• PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
• Further information can be found at pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376

Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 49322