The government is set to bestow new powers on the financial regulator which will overhaul the way in which it can cancel the authorisation of firms no longer carrying out regulated activities.
In a policy paper published yesterday afternoon (July 20) HM Treasury confirmed it intended to "streamline" the way in which the Financial Conduct Authority cancelled authorisations, including grounds where firms had failed to pay their regulatory fees.
The Treasury said under current rules the FCA spends "significant time" gathering evidence if it suspects a firm is no longer carrying out regulated activities, including attempting to repeatedly contact the business and searching for alternate contact details.
But under the new rules the FCA would be able to serve a first notice by letter to the last address provided by the firm and, in the event the firm fails to respond within 28 days, can publish a notice on its website and register warning action had commenced to remove the firm’s authorisation.
After one month of the public notice the FCA can cancel the firm's authorisation.
The Treasury said: "The current process for cancelling a firm’s authorisation is no longer sufficient to allow the FCA to quickly cancel a firm’s authorisation where they suspect they are no longer carrying out authorised activity and remove these firms from the financial services register.
"In order to streamline this process and allow the FCA to more quickly remove inactive firms from the register, the government intends to provide an additional process through which the FCA can cancel the authorisation of firms no longer carrying on FCA-regulated activities."
The Treasury warned the FCA was currently regulating almost 60,000 firms, significantly more than when the rules surrounding cancellation under the Financial Services and Markets Act were originally introduced.
According to the City watchdog's own calculations at any one time there are 300 to 400 firms no longer carrying out regulated activities which have not requested to cancel their authorisations.
The government said this posed a risk to consumers, particularly surrounding inaccuracies on the FCA register - an issue which was flagged by the Complaints Commissioner in its annual report last year.
Warning bells have been sounded by the commissioner throughout the year over the "seriously inaccurate" register, with some inaccuracies exploited by fraudsters to clone inactive firms and scam consumers.
The Treasury said: "The register’s accuracy is integral to ensuring consumers considering a financial product or service have the required information to take informed decisions.
"It is therefore important that the FCA can keep this as up to date as possible, so that consumers have the latest information regarding a firm’s authorisation status."
rachel.mortimer@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
