The House of Lords has called on the FCA to halt its plans to push forward with 'naming and shaming' firms facing investigations.

The House of Lords’ Financial Services Regulation Committee said it has concerns that the regulator’s plans could damage the reputation of innocent firms.

Committee chairman Lord Forsyth of Drumlean said the FCA had been unable to make a strong argument for the rule changes and that its consultation process on the rules had been a failure.

He told the House that the FCA, “consultation on the changes has been an abject failure and even the FCA chairman acknowledged this has not been the FCA’s finest hour.”

He added that the FCA itself seems to have concerns about the effect on firms that do not end up facing regulatory censure following an investigation.

He said: “Less than 18 months ago the FCA stated that it recognised that the disclosure of an enforcement investigation could inappropriately damage a firm’s reputation if the investigation did not substantiate the FCA’s concerns.

“We simply could not understand the FCA’s about-turn in such a short period of time.”

A spokesperson from the FCA told Financial Planning Today that it should have handled the consultation better.

They said: “We should have handled the initial consultation better, for example engaging on the proposals in advance. As the Committee acknowledges, we took that feedback on board. We engaged extensively with industry and revised our proposals.
 
“We’ll consider the Committee’s report carefully, alongside the other feedback to our consultation, as we decide on the next steps on the proposals.

“We also welcome the recognition that our efforts to increase the pace of investigations are working.”

The FCA is set to implement its controversial name and shame proposals this year.

In November the FCA made changes to its proposed name and shame proposals, saying it plans to give firms subject to enforcement investigations a 48 hour window to view the contents of any announcements before they are made public.

This is in addition to 10 days' notice that their firm is being investigated before the FCA decides what, if any, announcements will be made.

Originally the regulator proposed that firms were only given one day’s notice of any publication of investigations.

The regulator laid out its revised ‘name and shame’ proposals in November, making clear that its proposals on increased transparency only involve its enforcement work and not its supervision work.

Members of the House of Lords earlier this week criticised FCA chief executive Nikhil Rathi for his ‘unconstructive’ response to their report published in October which branded the regulator ‘incompetent.’

The All-party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services said it “must absolutely refute” Mr Rathi’s claim that the FCA is now “a very different organisation.”

The AAPG published a new supplementary report on the regulator earlier this week in which co-chair Bob Blackman MP said that he does not believe the regulator’s Transformation Programme has been a success.