The Financial Conduct Authority confirmed the move represents an effort to ensure clients can claim redress if necessary before a firm, which potentially has back book issues, leaves the industry.
The watchdog is currently in the midst of a crackdown on unsuitable defined benefit advice, having warned almost 80 per cent of advisers in the market about their practice last year.
In October Debbie Gupta, director of financial advice at the FCA, said the watchdog had written to more than half of the 2,500 advice firms operating in the defined benefit market expressing its concerns.
Now the FCA has confirmed those firms which are currently fielding defined benefit supervision enquiries from the regulator are having any application to cancel authorisation temporarily blocked.
It is understood the FCA will consider the applications once its enquiries are completed. In the meantime, refusing the requests keeps a firm in the financial industry and allows consumers who have been misadvised to approach it for redress if appropriate.
This approach should also prevent an adviser from leaving the industry and resurfacing elsewhere, so-called phoenixing, before facing up to possible claims.
In a Sector Views paper published yesterday (February 18) the FCA listed phoenixing as a notable concern for 2020, with lifeboat body, the Financial Services Compensation Scheme, recently renewing its pledge to crack down on the practice in partnership with the regulator.
Phoenixing sees advisers, often with a history of poor conduct, attempting to escape liabilities to clients by closing down firms only to re-emerge elsewhere in the industry.
In December the FCA highlighted early successes from its clampdown on this tactic, claiming it had prevented seven suspected phoenix firms or people from becoming authorised in the past 12 months.
In a decision published yesterday the Complaints Commissioner sided with the FCA against a complaint made by an adviser whose application to cancel his direct authorisation, in a move to then become an appointed representative, had been blocked.
The adviser had been unable to secure professional indemnity insurance and the regulator's supervision department was also reviewing his firm as part of its work on defined benefit transfers.
The adviser complained this temporary block had delayed his ability to earn an income, placed his staff's jobs at risk and could disadvantage his clients.
But commissioner Antony Townsend ruled the FCA's policy that a firm's application for cancellation should be deferred pending reviews of its defined benefit transfer advice was "credible".