First Challenge to FCA's New Investigation Publicity Policy Dismissed

The High Court has dismissed a judicial review claim brought by an anonymised company ("CIT") challenging the FCA’s decision to publicly name it as the subject of an investigation. The court held that the FCA's decision to make a "naming announcement" was both lawful and reasonable, rejecting arguments that the regulator had misinterpreted its Enforcement Guide or acted unreasonably.

Given that naming the claimant (or providing sufficient detail about the case to enable the claimant to be identified) would be tantamount to determining the proceedings against it, the judgment has been written in two parts. Only Part 1 is currently public.

The FCA had hoped to introduce a broader power to name firms under investigation based upon a ‘public interest test’ (see further here). It ultimately dropped those proposals, and naming can only be done in ‘exceptional circumstances’. 

The decision provides useful guidance on how the FCA should approach the naming of firms and how 'exceptional' should be judged. It also serves as a reminder of the high bar for successfully challenging FCA decisions through judicial review.

A more detailed review of the judgment can be found here. 

Key Takeaways

This judgment provides important guidance on the scope of the FCA's powers to publicise investigations and the courts' role in reviewing such decisions:

• Division of responsibility between the FCA and the courts: whilst the objectively correct interpretation of the Enforcement Guide is ultimately a question for the court, questions about whether circumstances are exceptional, whether an announcement is desirable, and which option is the appropriate regulatory response belong to the FCA as primary decision-maker, subject only to reasonableness review by the courts.
• Key principles of interpretation: "exceptional circumstances" means exceptional relative to investigated-situations (not regulated-situations), and desirability and exceptionality must be judged against both alternatives (no announcement and anonymised announcement) with reasons relevant to naming the firm, not just announcing. The court found that the FCA's justification for exceptional circumstances was not based simply on the seriousness of the matters being investigated, but also specifically addressed the question of whether to name CIT.
• Consumer protection as justification for naming: the court accepted that where the FCA considers that consumer protection requires customers to be specifically informed that a particular firm is under investigation, and that an anonymised announcement would leave customers inadequately protected, this can justify a naming announcement even where potential prejudice to the firm is identified. Here the case team had identified regulatory reasons for communicating a message specifically to the claimant's customers about action they may wish to take in the light of the investigation, given the way in which they might have become customers of CIT. This was "fatal" to the claimant's reasonableness challenge, as it represented evaluative regulatory reasoning which specifically related to naming the claimant alongside announcing the investigation.
• Routes to an anonymised announcement: the court acknowledged an unresolved question about whether paragraph 4.1.8G of the Enforcement Guide provides the exclusive basis for making an anonymised announcement, or whether alternative independent routes could exist. The court declined to resolve this question, as all parties agreed that an anonymised announcement was a viable option in this case and met the criteria in 4.1.8G
• Anonymity and reporting restrictions: the case was heard with anonymity orders and reporting restrictions in place, as naming the claimant would have been tantamount to determining the proceedings against it