FCA ramps up action against firms not using their regulatory permissions
The Financial Conduct Authority (FCA) is to speed up the removal of firms that do not use or do not need their regulatory permissions in a move aimed at strengthening consumer protection. The regulator has published Policy Statement PS22/5 , which sets out changes to the Handbook and Enforcement Guide in relation to its new cancellation and variation powers.
The FCA has always been able to cancel?or vary?a firm’s?permissions to carry out FCA-regulated activities if it has not used them in order to update its Register and reduce the risks of harm to consumers. However, in some cases the FCA has had to wait for 12 months in order to do so.
The new power is set out in Schedule 6A to Financial Services and Markets Act 2000 which introduces a streamlined process allowing the FCA to cancel?or vary?permissions?without the firm applying or having to get the firm’s consent. The FCA will in future provide a firm with two warnings if it believes it is not using its regulatory permission. The regulator will then be able to cancel the permission, or change it, 28 days after the first warning if the firm has not taken appropriate action.???The new power also makes it possible for the FCA to reverse or annul decisions to use it.
Where a firm fails to pay its regulatory fees, submit returns or complete annual declarations, the FCA may view these as indicators of a lack of regulated activity which may lead to permission being removed through use of this new power.??
What to do next
FCA-authorised firms that are not or no longer carrying on any FCA-regulated activity are being asked to consider contacting the regulator and requesting that it cancel their permission. Members can find more information about how to cancel an authorisation here.
Similarly, FCA-authorised firms that no longer carry on particular regulated activities within the scope of their permissions should consider asking the regulator to remove those activities. Members can find more information about how to apply for a variation of permission here.
The new power also supports the FCA’s existing ‘use it or lose it’ https://www.fca.org.uk/news/statements/fca-reminds-firms-regularly-review-regulatory-permissions initiative, which has seen the regulator carry out 1,090 assessments since May 2021 to see whether firms are undertaking the financial activity for which they have permission. This work has led to 264 firms applying to voluntarily cancel, and a further 47 to modify, their permission to carry out regulated activities.??
Advising on P2P agreements
Back in 2016 when HM Treasury introduced a new regulatory permission of ‘Advising on P2P agreements’ in order to allow firms to include the then-new Innovative Finance ISA within an ISA tax wrapper/ It applied the permission to all firms which held the permission ‘Advising on investments’ which includes most general insurance brokers. At that time, BIBA highlighted that members would need to apply to the FCA to have the permission removed, if they would not be using it.
Members were reminded in 2017 to remove the permission if their firm would not be using it, to avoid unnecessary regulatory fees. A second reminder was published in 2021.
The FCA’s focus on removing permissions that firms do not need, or are not using, acts as a further prompt to apply to remove this, or any other unnecessary permission(s).
BIBA members’ compliance and regulation queries should be directed to:?compliance@biba.org.uk?quoting their membership number.
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