Financial Conduct Authority fends off challenge to decision to name firm under investigation

The Financial Conduct Authority (“FCA”) prompted an outcry in 2024 when it put forward proposals publicly to name (and, in the view of many, shame) firms under investigation. It subsequently rowed back from those proposals, largely reverting to its previous position that it will only name a firm under investigation in “exceptional circumstances”.

A recent court challenge (R (CIT) v Financial Conduct Authority (No.1) and R (Claims Protection Agency Ltd) v Financial Conduct Authority (No.2)) to an FCA decision to name a firm at the outset of an investigation has shown how the “exceptional circumstances” test works. It may encourage the FCA to name more firms under investigation in future.

What prompted the challenge?

The FCA opened an investigation into a motor finance claims management firm, The Claims Protection Agency Ltd (“TCPA”). The investigation concerned (i) whether TCPA’s promotions had misled potential customers as to the value of any claims they may have and failed adequately to explain that they could pursue those claims themselves at no cost, (ii) whether TCPA had engaged in high-pressure selling and (iii) whether TCPA had adequately identified and protected vulnerable customers. 

The FCA then decided publicly to announce that TCPA was subject to the investigation. It gave TCPA just 24 hours’ notice of its decision to do so. TCPA launched a judicial review. TCPA’s basis for doing so was that, in deciding to publicly name it, the FCA had materially misinterpreted its “exceptional circumstances” test for making a naming announcement and/or had reached an unreasonable decision and/or had followed an unreasonable process.  

What was the outcome?  

The court dismissed TCPA’s challenge to the FCA’s decision to name it on all counts. In doing so, it clearly set out the various components of the “exceptional circumstances” test. The starting point is always that a naming announcement will not be made. To move away from that starting point, and name a firm, the situation must be exceptional, by reference to other investigated situations. The naming announcement must also be desirable. The final component to consider is the potential prejudice to the firm which is being named. The possibility of naming a firm must always be measured against the alternatives of (i) no announcement at all; and (ii) an anonymous announcement.  

The court found that here, the FCA had considered and correctly applied all components of the test. It also pointed to one key aspect of the FCA’s reasoning that essentially trumped all others and meant that TCPA’s challenge was always bound to fail: that the key benefit of the naming announcement was to protect TCPA’s customers, by enabling them to understand the circumstances in which they had become customers and to pursue alternative options if appropriate. No announcement, or an anonymous announcement, would not have achieved that goal.

Key takeaways

This decision will likely encourage the FCA publicly to name more firms under investigation, particularly in circumstances where it can point to a customer protection imperative in the way that it did here. Perhaps more significantly, the court was prepared to look past imperfections in the way that the FCA had taken and recorded its decision to name TCPA and look to the heart of why the decision had been made: to protect TCPA’s customers and enable them to assess their options. In practice, this means that as long as the FCA can articulate a credible consumer protection rationale for naming a firm, the prospects of a successful judicial review challenge will be slim, however rushed or flawed the FCA’s internal process may have been. This sets a higher bar for firms considering whether to challenge a naming decision. The judgment also reveals that the FCA’s approach to TCPA had support in its highest echelons, with its Joint Executive Director of Enforcement and Market Oversight, Therese Chambers, driving the decision to name it.

Firms should be prepared for this and should also note the 24 hour timeframe that TCPA was given to respond to the FCA’s decision to name it. If there are signs that the FCA may be looking to open an investigation, forward-planning and a strategy for handling any notification from the FCA that it intends to make a naming announcement are essential. 

Our practice

For advice on how the FCA investigation might affect your organisation and what the best approach is to be prepared, get in touch with one of our specialists from the regulatory, compliance and investigations and financial services regulatory teams. 

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