The Financial Conduct Authority has announced that it will use new powers to speed up the process of removing regulatory permissions of companies that are not using their permissions. The new powers, announced in a consultation in September 2021, come as a result of change in law allowing the FCA to streamline and shorten the removals process.
Under the new changes, the FCA will issue a company with two warnings if it believes it is not using its regulatory permission. If the company fails to take appropriate action, the FCA will cancel or change the permission, 28 days after the first warning.
The new expedited process will also allow the regulator to act quickly when cancelling a firm’s permission when it is no longer required and to swiftly respond to inappropriate uses of permission. For example, when a permission is being wrongfully used to market high risk products that are not regulated by the FCA.
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.
The new power also supports the FCA’s existing ‘use it or lose it’ initiative, which has seen the FCA carry out 1,090 assessments since May 2021 to see whether firms are undertaking the financial activity for which they have permission. As a result of this, 264 firms applied to voluntarily cancel, and a further 47 to modify, their permission to carry out regulated activities.
The changes will apply to 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.
The FCA believes these new powers will help in strengthening consumer protection by reducing the risk of consumers misunderstanding or being misled about financial risk or how much protection they have. For example, believing unregulated activities are covered by the Financial Services Compensation Scheme when they are not.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, 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.’
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