Market responds as FCA shelves ‘name and shame’ and D&I proposals

The FCA announced major U-turns in March 2025, impacting two proposals it had announced to the market in recent years.

In September 2023, the FCA and Prudential Regulation Authority (PRA) consulted on proposed rules and expectations around diversity and inclusion (D&I) for regulated firms.

The idea was to place more requirements on bigger businesses to collect, report and disclose data against certain characteristics and set targets to address underrepresentation.

Meanwhile, in February 2024, the FCA announced plans to name more companies it investigates, with it proposing a new public interest test.

This would have allowed the regulator to name more firms under investigation if the situation was deemed to be in the public interest.

However, both these plans have been shelved.

In a letter to the Treasury Select Committee earlier this week (12 March 2025), the FCA said it had no intention of taking forward proposed work on improving D&I at regulated firms and that it would stick to its stricter exceptional circumstances test when it comes to announcing investigations.

Public interest test

The FCA commented that the reason the public interest test for investigations had been dropped was because there had been a lack of consensus across the market on this proposal.

When the plans were first announced, they were condemned by a wide range of organisations that said the move could harm the integrity of the insurance sector at a time when the regulatory admin burden continues to be a resource challenge.

Scrapping the plans has been welcomed by the UK general insurance industry. For example, ABI director general Hannah Gurga said: “The FCA’s decision to not take forward its proposals to publicise enforcement investigations is extremely welcome.

“We’ve consistently stressed that this would have had detrimental impacts on consumers, firms and the reputation of the UK’s regulatory system.

“We fully support its decision to drop this approach.”

The International Underwriting Association (IUA) echoed these thoughts, with it saying that going ahead with the plans “would have made it more likely that investigations may be published prematurely”.

Helen Dalziel, IUA director of public policy, added: “Our members were very strongly opposed to the FCA’s plans.

”It is good news that the test for publicising investigations will not be altered. We believe that the FCA already has the powers it requires to effectively carry out enforcement action.

“There is now less likelihood of negative publicity creating a prejudicial environment in which guilt is presumed. The concept of ‘innocent until proven guilty’ is a fundamental doctrine of criminal law and the mere association with an ongoing investigation could cause substantial harm to a firm’s standing in the market.”

More support for anonymous reporting

Although the FCA has dropped the proposed public interest test, it did confirm that there had been support for publishing greater detail of issues under investigation on an anonymous basis.

Katie Stephen, partner and London co-head of the contentious financial services group at law firm Norton Rose Fulbright, said the FCA has a “clear desire to publicise action being taken in particular cases”.

She added: “Obtaining further details of investigations on an anonymous basis could be helpful to firms in avoiding pitfalls, assuming sufficient information is provided, but a balance will have to be achieved here so as not to give away the identity of the subjects and lead to unhelpful speculation.

“Senior managers will need a process for identifying lessons learned and any actions needed within their areas of the business [because] – once this information becomes available – failing to do so will no doubt be treated as an aggravating factor if similar issues are identified in the future.”

The FCA said it would publish its final policy on investigations by the end of June 2025.

Imogen Makin, counsel at WilmerHale, said:” The FCA will need to keep responses to the consultation in mind when finalising the policy statement.

“Particular attention is needed around the publication of greater detail about the issues under investigation.

”For example, despite the FCA’s statement that this will be on an anonymised basis, care is needed to ensure that neither firms nor individuals can be identified by the details published.”

D&I response

Meanwhile, the FCA and PRA’s plans for D&I would have seen a proposed regulatory framework establish minimum standards to improve diversity at a firm level and necessitate transparency on companies’ approaches to D&I.

However, negative responses to the consultation from the insurance and wider financial services industries, as well as recent FCA noise around “streamlining regulation”, have led to the proposals being dropped.

The FCA and PRA admitted that “in light of the broad range of feedback received, expected legislative developments and to avoid additional burdens on firms at this time”, they had decided to not take proposed plans forward.

Makin said: “With the D&I consultation, the FCA’s acknowledgement of the burden on firms from its existing rules is welcome, but D&I is not a topic that should be forgotten by regulated firms.

“As the Sexism in the City report by the Treasury Select Committee demonstrated last year, non-financial misconduct in the financial services sector remains an issue that needs to be addressed.”

Sheila Cameron, chief executive at the Lloyd’s Market Association (LMA), agreed that ”stepping back on D&I data reporting is disappointing”.

She noted:”Lloyd’s market insurers have been reporting [D&I] data to Lloyd’s since 2020 and it has been a hurdle principle of Lloyd’s oversight since 2022.

”Inclusion is a cornerstone value of the LMA and essential to the market’s future success.”

Gurga added that the ABI had supported the FCA’s proposals and will continue to promote D&I across the industry.

She said: “Advancing and promoting diversity, equity and inclusion (DEI) and improving representation in the workplace is vital to an effective insurance and long-term savings industry.

“While we had supported the FCA’s proposals, we will continue to champion DEI across our industry through our blueprint, allyship awareness training and collaboration with members and stakeholders.”