It’s no secret that the FCA has come in for flak over it’s naming and shaming enforcement plans and it’s no surprise it has decided to dilute them as a result. But should it be backing off?

Wealth manager trade body PIMFA, and many others, are on record as criticising the proposals as potentially a threat to firms, especially small firms.

If the FCA gets it wrong they could push small firms into failure. It could also be the case that premature announcements about investigations may damage firms irreparably, particularly if they are later exonerated. There is merit in this.

With this in mind it was no surprise that the FCA announced this week it was listening to the ‘feedback’ - as we now must call it - and changed a few things.

One of the most significant is the addition of a 48 hour ‘cooling off’ period allowing firms facing imminent naming and shaming to respond to the FCA’s plans to name them before a public announcement.

The FCA believes that, inherently, naming firms under investigation is doing consumers a favour and could prevent further harm by warning customers and deterring similar wrong-doing. It has a point.

It would be disingenuous to suggest that naming and shaming will not have some positive impact although I suspect that naming and shaming, or alerting the public to ongoing investigations, will probably come too late to have much impact in the scheme of things.

PIMFA says that the proposals could cause serious harm to smaller firms, and indeed they could, but it would be unfair to say that larger firms will not be impacted too. The principle is really whether firms should be named while under investigation at all.

It’s worth looking at other enforcement bodies, plenty of whom regularly announce that they are investigating someone or a company. This includes the police, the Competition and Markets Authority, the Serious Fraud Office and many others. There is certainly a deterrent effect to this in many people’s eyes.

I can also see that the FCA, stung to some degree by recent criticism that it’s an "incompetent body", wants to raise standards in the industry and try and tackle some of the endemic poor behaviour of some.

Just in the last few days it fined a 'reckless' pension transfer adviser nearly £1.4m for funding his luxury lifestyle and making millions arranging poorly advised pension transfers for hundreds of people who lost out as a result on an epic scale.

The scale of ‘pension transfer specialist’ Paul Pryke’s dealings was huge. He helped arranged some £200m worth of pension transfers over several years for nearly 1,000 people, most of whom probably shouldn't have transferred their DB pension. The compliance on these was atrocious; poorly done fact finds, failure to take into account clients' finances or wishes and poor record keeping. His firm, Leeds-based C&I earned over £8m from pension transfer fees.

The poor-old Financial Services Compensation Scheme has already been forced to pay out over £42m in compensation to his clients, all paid for the industry via the FSCS levy. If I was an adviser I’d be seriously annoyed by this.

As Financial Planning Today has reported recently there have been legions of these cases where firms have dumped their liability on the FSCS after collapsing. It really is quite outrageous and its a big problem.

Given all this, could a ’naming and shaming’ policy a few years ago have done much to prevent this? I have my doubts but it is possible it could have deterred others from trying the same tactics. Naming and shaming may also alert similar firms trying the same methods to back off.

The issue will really be how the FCA implements its naming and shaming policy (if it does at all) and at what stage investigations are made public. The timing of naming and shaming announcements could be key. Too early and they risk pushing the accused firms into collapse; too late and they may have little deterrent effect.

One further issue for the FCA to grapple with is its new ‘growth’ mandate from the government. It has always seemed odd that a body which is effectively a financial regulator and to a degree a financial police force also now has duty to promote sector growth. This really should be a job for another body and may not rest easy with the FCA’s naming and shaming strategy and enforcement role.

Whatever route it chooses, if it can cut down on the still appalling level of firm failures and poor and often fraudulent behaviour by a minority, it will at least be doing some good.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin >Top Tip: Follow Financial Planning Today on Twitter / X @_FPToday for breaking news and key updates