The Financial Conduct Authority has been accused of "box-ticking" in its management of the financial services register, as the regulator admitted it should review its handling of tip-offs.
In a decision published in October the Complaints Commissioner warned the regulator was not prioritising the "very real risk" of consumers falling victim to scam firms because its register was not kept up to date.
A consumer had complained the details of two escrow firms were incorrect on the register, warning the regulator one firm was now insolvent and the other had been dormant for two years, but the FCA said it would never remove the details of a firm from the register even if it was no longer authorised.
The FCA has always maintained it is the responsibility of firms to report any relevant changes in their businesses to the regulator so it can update the database accordingly, a stance it upheld with the latest complaint.
The complaint was escalated to the Complaints Commissioner who sided with the consumer and criticised the regulator for taking more than nine months to investigate the issue, which he said was "not very complex".
Whilst the commissioner acknowledged it was not feasible for the FCA to make its own independent checks on each of the more than 50,000 firms it regulates, he said the regulator had "missed the point" of the complaint and interpreted it in a "narrow and unhelpful way".
Commissioner Antony Townsend said: "From my previous investigations of complaints about the FCA register, it is clear that the FCA is aware that not all the information on its register is correct and it has a major project under way to address the register’s deficiencies.
"The FCA rightly places the responsibility on firms to notify it of any material changes in order to be able to keep the register accurate, given the number of firms and individuals it regulates and the resources available to manage the information on the register. However, I am very concerned about the rigid approach the FCA has displayed in this case."
Mr Townsend said the FCA technically did nothing wrong in not updating the register when notified by a third party of an error, because its procedures required the principal of a firm to submit a form requesting a change of status before the regulator acts to make any amendments to the register.
But he added: "But this puts a box-ticking exercise above the very real risk of consumers falling victim to a scam firm potentially seeking to exploit the deficiencies of the register and it not reflecting the true position of firms. This is not the first complaint I have had of this nature."
The commissioner said this risk was clearly demonstrated by the fact the dormant firm about which the consumer had raised concerns had in fact been cloned.
As a result of the complaint the register entry for this firm was later amended.