UK updates enforcement guide for heightened transparency

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The United Kingdom Financial Conduct Authority (FCA) published the final revisions to its Enforcement Guide on Tuesday after a consultation on proposed measures to streamline the guide and increase transparency.

The updated enforcement guide’s main highlight is that the FCA has formally upheld the existing “exceptional circumstances” test for announcing investigations into regulated and listed firms while adding three new conditions under which investigations will be announced.

Under the existing “exceptional circumstances” test, the FCA considers a public announcement about an investigation desirable if it will maintain public confidence in the financial system or the market, protect consumers or investors, prevent widespread malpractice, help the investigation itself, for example, by bringing forward witnesses, or maintain the smooth operation of the market.

In its final update, published on June 3, the FCA identified three additional situations, or ‘circumstances,’ where “there was broad support for increased transparency”:

• The first was where, in an investigation of suspected unauthorized financial services or offenses relating to unregulated activity, an announcement would help warn consumers and/or aid in the investigation;
• The second relates to cases where the investigation has been disclosed publicly by the subject or an affiliated entity, regulatory body, government, or public body;
• The final new situation relates to “anonymized announcements,” which do not name or identify the subject of the investigation, which could help educate the public on misconduct being investigated by the FCA.

According to the regulator, this updated guide will help it achieve “greater transparency” in its enforcement investigations and provide firms and consumers with a more user-friendly document.

“We will continue to improve the pace and focus of our investigations, increasing the impact of our work for the benefit of consumers and markets, and therefore the wider economy,” said the FCA.

The FCA policy statement and revised enforcement guide are relevant to all firms under the regulator’s oversight, including those authorized by or registered with FCA, those carrying out designated activities, and relevant securities issuers.

Currently, this does not apply to the majority of digital asset companies operating in the U.K., as the sector remains largely unregulated in the country. However, this may be soon to change.

In recent months, the U.K. Treasury and FCA have upped the tempo of work towards a digital asset regulatory framework that they hope to finalize later this year.

While the details of the framework are not yet clear, it’s almost certain that the vast majority of the digital asset space, including exchanges, dealers, and agents, will fall under the jurisdiction of the FCA, with the possible exception of ‘systemic stablecoins,’ which will likely fall under the Prudential Regulation Authority, the U.K.’s bank and insurance sector regulator.

This means that by 2026, the FCA enforcement guide and its exceptional circumstances test for announcing investigations will be extremely relevant for most digital asset companies operating in the country.

The consultation

The FCA first published its enforcement guide in 2007. Since then, it has grown significantly, with the regulator consulting on proposed measures to update and streamline the guide in February 2024 and November 2024.

The consultation included proposals for a new investigation publicity policy to provide a “measured increase in transparency” under a new “public interest” test.

However, following significant criticism of the proposed public interest test—also referred to as the ‘name and shame’ policy—from industry participants and lawmakers, the FCA decided to stick with the exceptional circumstances test while adding a few more circumstances to the list.

In terms of the next steps, the FCA said it would continue to monitor relevant data and stakeholder feedback while assessing the revised enforcement guide’s impact, including on public and industry confidence in its enforcement work.

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