David Prosser: Transparency in the City may not be as clear cut as it seems

Outlook Just how transparent do we want our regulators to be? If you think the answer is obvious – that is, completely transparent – a change ofpolicy at the Financial Services Authority yesterday might prompt you to reconsider (or at least to concede this isn't a black and white issue).

One of the City watchdog's duties is to investigate cases where individuals or companies might have fallen foul of financial regulation and to impose penalties if it decides this is what has happened. The guilty parties, however, have a right of appeal to an independent tribunal and, until yesterday at least, the FSA has always held off publishing its verdicts in cases where such an appeal is made.

One can see why. The regulator's right to publicly name and shame companies or individuals is a very powerful weapon – in an industry where trust is so critical, this sanction can sometimes be more damaging than the actual penalty imposed by the FSA. So if legal proceedings have not run their course, there is an argument for keeping them confidential.

That has always been the view taken by the FSA. But yesterday, it announced its decisions in two disciplinary cases even though the individuals concerned are appealing. It did so under new powers granted to it by legislation passed last year with the intention of increasing standards of transparency at the City regulator.

There are a number of arguments in favour of the FSA's new approach. Above all, the legal system in this country doesn't usually grant anonymity to those who are accused of misdeeds – in even the most serious of criminal cases, defendants may see their names dragged through the mud only for them to be acquitted. Why should those accused of breaking the rules in the City be given special treatment?

Moreover, one of the most important duties of a financial regulator is consumer protection – the clients of those targeted by the FSA need to be made aware of the watchdog's worries as soon aspossible. In any case, as the regulator itself points out, in the past, the tribunal has very rarely overturned its decisions.

Nevertheless, sooner or later, there is going to be an almighty row about this subtle shift, which was opposed by most of those who responded to the FSA's consultation on it. The first time the tribunal clears someone whose name has previously been blackened by the regulator, you can expect some bitter recriminations – particularly because the FSA has already explicitly ruled out paying any compensation in such circumstances (and has backing in the legislation for this stance).