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The High Court has dismissed the first judicial review challenge to the Financial Conduct Authority's (FCA) interpretation and application of the "exceptional circumstances" test set out in its Enforcement Guide (the Guide): CIT (an anonymised company)v Financial Conduct Authority (No.1) [2025] EWHC 2614 (Admin).
By way of refresher, the "exceptional circumstances" test in the Guide governs when the FCA may publicise whether or not it is investigating a particular enforcement investigation, including by naming the firm under investigation (Naming Announcement).
In the present case, in 2025, the FCA commenced a formal investigation into a firm under s.168 of the Financial Services and Markets Act 2000 (FSMA). The FCA notified the firm of the investigation under s.170(2) FSMA, which triggered internal discussions within the FCA about whether to make a public announcement. The FCA's case team first recommended an anonymised announcement, citing concerns about reputational harm and the early stage of the investigation. However, a subsequent memorandum recommended that the FCA name the firm in the announcement. The rationale was that naming the firm would better serve the FCA's statutory objectives - particularly consumer protection and market confidence. A key consideration was the need to communicate directly and clearly with the firm's customers, which the FCA believed could not be achieved effectively if the firm remained unnamed or was left to issue its own communications. The FCA decided to adopt the second recommendation and wrote to the firm giving 24 hours' notice of its intention to publish the naming announcement.
The firm objected, arguing that the FCA had: (i) misinterpreted its own Guide, particularly the "exceptional circumstances" test for naming firms; and (ii) acted unreasonably, given that no findings had yet been made and the reputational damage could be significant. The firm sought judicial review of the FCA's decision, and the FCA agreed to defer publication pending the outcome of the review.
The court held that there was no material misdirection in the FCA's interpretation of the Guide. It noted that the memorandum setting out the detailed reasons for the FCA's decision did not contain any misstatement of the Guide and its composite reasoning had to be read as a whole. The court also concluded that the FCA's decision was within the range of reasonable decisions open to the decision-maker. Although the court acknowledged some weaknesses in aspects of the FCA's reasoning, when viewed as a whole, they did not justify the court interfering with the evaluative regulatory judgment of the decision-maker. However, the criticisms directed at the structure and form of the reasoning are worth noting, and will hopefully encourage the FCA to adopt a more structured and sequenced approach to reasoning in the future.
From a financial services perspective, one interesting aspect of the decision is that it records that the firm was given only 24 hours' notice, but makes no observation on this other than noting there was no procedural unfairness challenge before the court. Earlier this year, the House of Lords Financial Services Regulation Committee in its report on Naming and Shaming: how not to regulate had voiced its view that giving firms "24 hours' notice of the announcement of an investigation was insufficient given the amount of activity required to prepare for such an announcement". Also, in its revised consultation on proposals to "name and shame" the subjects of its investigations based on a more flexible "public interest framework" as opposed to the existing and stricter "exceptional circumstances" test, the FCA had proposed that it would typically provide entities with ten business days to make representations. Crucially, current guidance does not indicate any specific notice period (see our blog post and podcast).
While we do not expect a large number of FCA investigations into regulated firms to be publicised, firms should be alive to a risk where there is a serious consumer protection issue. Given the level of interest in these issues, this may not be the last say the courts have on publicity around regulatory investigations.
