FCA speeds up removal of firms’ permissions to protect consumers
The Financial Conduct Authority (FCA) will now be able to act more quickly to cancel permissions of firms to reduce risks of harm to consumers.
The City watchdog said consumers are “at risk of being defrauded by criminals impersonating or cloning authorised firms that no longer conduct FCA-regulated activities”, which is why accuracy is important.
The regulator was previously able to cancel a firm’s permissions to carry out regulated activities if it had not used them, but it had to wait 12 months.
Thanks to powers given to the FCA under the Financial Services Act 2021, the regulator can now cancel or vary a firm’s permissions without their consent and 28 days after a first warning.
This will allow the watchdog to respond quickly when permissions are being wrongfully used to market high-risk products that are not regulated. The new powers can also be used while investigating or taking disciplinary action against firms in an enforcement context.
“Our use of the new power will also advance our statutory competition objective by reducing the risk that consumers are led to believe that we regulate the unregulated activities of FCA-authorised firms,” the FCA noted.
“Consumers will have more accurate information in that regard and will be better able to make informed decisions.”
It added that where a firm fails to pay its regulatory fees, submit returns or complete annual declarations, it may consider these as indicators of a lack of regulated activity.
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“Businesses with permissions they don’t need or use, risk misleading consumers,” said Mark Steward, executive director of enforcement and market oversight at the FCA.
“These new powers will enable us to take quicker action to cancel permissions that are not used or needed. Firms should regularly review their permissions, ensure they are correct, and they are acting in accordance with them. If they are not needed or used, they should seek to cancel them.”
The move comes as part of FCA’s “use it or lose it” initiative which has seen the regulator carry out 1,090 assessments since May 2021. This has resulted in 264 firms applying to voluntarily cancel, and a further 47 to modify.
It is also in response to the London Capital & Finance mini-bond mis-selling scandal that lost investors millions of pounds.
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