I think you are missing the point - doesn't matter whether the CAA were right or wrong, the bad publicity that was generated will be enough to damage confidence.
Google "Monarch Airlines" and scroll through the pages - as you say yourself it
seriously damaged Monarch's brand.
I've no connection with the CAA but am familiar with regulators of other industries - they would never say that they "happy" with an organisation, if you push really hard they may confirm that they aren't currently taking any action, and I'd be amazed if the CAA are any different.