A freedom-of-information request lodged by the Sunday Times in London has revealed that the UK's Financial Conduct Authority has placed 48 firms under investigation because they might not have given their customers a true and fair view of the charges they have levied. It also reveals that, as yet, it has referred no firm to its enforcement department.

The paper made its request in respect of the rules relating to information about costs and associated charges in COBS 2.2A2(1)(d) and COBS 6.1ZA.11 to COBS 6.1ZA.15, all to be found in the FCA's conduct-of-business sourcebook.

The FCA categorises firms that must obey MiFID II as "investment funds", "wealth managers", "advisor platforms", "D2C [direct-to-customer] platforms" etc, but in its FOI answer it declined to say which categories the firms occupied. It merely says that these are firms at which it has spotted "possible instances of non-compliance." It has not issued a warning notice (or other statutory notice), nor any penalty or other sanction under the Financial Services and Markets Act 2000 to any firm in respect of failure to comply with MiFID II rules in respect of asset management charges.

MiFID II came into force on 3 January last year and the FCA says that it contacted the firms between then and 16 November, the date of the newspaper's request. In the request it asked the FCA to enumerate its enforcement actions between 3 January and "the date of your response." Instead of answering all questions immediately, the FCA asked the paper several times - the first date the document mentions is 13 December, the last is 8 January - to answer questions about its questions. It eventually responded some days ago. Instead of fixing its answers according to the date of its final response with all the figures, or indeed any of the responses that were mere requests for clearer questions, the FCA chose the earliest date of 16 November.

The openness of the FCA

The first question was about the number of firms under investigation and ended: "Please provide details of which of the relevant rules is applicable in each case." The FCA declined to do this, claiming that it might compromise those firms (for whose names the paper did not ask) because readers might work out their identities from a breakdown by type of firm. In turn, it argued, this might prejudice its duty to regulate (and, if necessary, punish) them properly. It might also prejudice their commercial interests. Section 31 Freedom of Information Act 2000 exempts all information that might prejudice the prevention or detection of crime, the apprehension of offenders, the administration of justice, the maintenance of good order in prisons; and, as in the FCA's case, the exercise by any public authority of its functions. Section 43 exempts information likely to prejudice the commercial interests of anyone.

The claim that the publicisation of the number of firms in each category to which the FCA has written might prejudice any future disciplinary action that it might take seems, on the face of it, an exaggerated one. This is because the events into which the FCA is enquiring have already happened; if the firms do not send it accurate information about the charges that they have been levying, or if they admit to having sent customers inadequate information, they have trangressed already and are punishable. The idea that the disclosure of these firms' numbers and categories to the public would be bad because it might prevent the FCA from lying in wait for them or their staff to commit further misconduct while customers suffer seems to contradict one of the regulator's three operational objectives laid down in the Financial Services and Markets Act, namely the aim of protecting consumers. The numbers of firms in the categories, moreover, do not appear to be sufficiently small to give their identities away; there are 22 or more D2C platforms in the UK, 24 or more advisor platforms, about 83 wealth managers and scores of investment fund firms.

Another question said: "Provide the number of occasions the FCA has appointed investigators in order to investigate a potential breach of the relevant rules." The FCA answered this simple request for a number - which in all likelihood is probably zero - with a cloud of words.

"MiFID II came into force on 3 January 2018. The FCA will act proportionately and not take a strict liability approach in relation to enforcement of MiFID II, given the size, complexity, and magnitude of the changes that are required to be in place in firms. This means we have no intention of taking enforcement action against firms for not meeting all the requirements straight away where there is evidence they have taken sufficient steps to meet the new obligations by 3 January 2018 – rather the FCA will work with such firms to enable them to meet the requirements. However, where firms have made no real or genuine attempt to be ready, or where key obligations are deliberately flouted, the FCA will take a much stricter approach."

These replies have not yet found their way onto the FCA's freedom-of-information page. To follow the FCA's record of enforcing MiFID II, click here and here. For the French regulator's perspective, click here.