The Financial Conduct Authority will use new powers to swiftly cancel or change what regulated activities firms are permitted to do, specifically when firms are not using their permissions.
In a policy statement published today (May 19), the regulator said it is changing its handbook and enforcement guide to give guidance on its new power which allows it to amend or cancel the statutory permissions of many firms to carry on regulated activities.
This new power was first announced in a consultation in September 2021, following a change in the law allowing the FCA to streamline and shorten the removals process.
The FCA said with its new power, it will provide a firm with two warnings if the regulator believes the firm 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.
In the guidance, the FCA said the power will allow it to vary or cancel a firm's permissions after a month, specifically where those firms appear to be carrying on no FCA-regulated activities for which they have permission, and have not responded to the regulator's outreach.
Currently firms are required to confirm that the information on the register is accurate on an annual basis.
The regulator will also be able to start the cancellation process as soon as it considers permissions are not being used, by serving 14 days’ notice on a firm.
The FCA said this will strengthen consumer protection by reducing the risk of consumers misunderstanding or being misled about their exposure to financial risk and how much consumer protection they have.
Where a firm fails to pay its regulatory fees, submit returns or complete annual declarations, the FCA said these may be indicators of a lack of regulated activity which may lead to permission being removed.
FCA executive director of enforcement and market oversight Mark Steward, said: ‘Businesses with permissions they don’t need or use, risk misleading consumers. 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 new power also supports the FCA’s existing ‘use it or lose it’ initiative, which has seen the City watchdog carry out 1,090 assessments since May 2021 to see whether firms are undertaking the financial activity for which they have permission.
This has resulted in 264 firms applying to voluntarily cancel, and a further 47 to modify, their permission to carry out regulated activities.
The changes will only affect firms authorised by the FCA under Part 4A of Financial Services and Markets Act 2000, meaning they will not apply to firms such as payment service providers or electronic money issuers.