The Financial Conduct Authority (FCA) has been handed powers to cancel or change regulated firms’ permissions in a quicker process.
The regime – following a consultation last year – will require businesses to prove they are carrying out the regulated activities they are permitted to or face losing the permissions, the watchdog said.
Firms will first be given warnings by the FCA, and failure to take action after two warnings will result in the cancellation or change of the permissions in question 28 days after the first warning.
The regulator said the powers will “strengthen consumer protection by reducing the risk of consumer misunderstanding or being misled about their exposure to financial risk and how much consumer protection they have”.
The process will also allow the watchdog to act quickly when cancelling a company’s permissions or when they being used inappropriately to market unregulated high-risk products.
The FCA said that some of the red flags that may lead to the cancellation of permissions include; failure to pay regulatory fees, submit returns and complete annual declarations.
Timing
The previous framework required the regulator to wait 12 months before it could take action, but under the updated rules, this will no longer be the case. The watchdog, however, has not specified for how long firms permissions must be unused before it will step in.
The regime will support the FCA’s existing ‘use it or lose it’ initiative, which has already seen the regulator carry out 1,090 assessments since May 2021, leading to 264 firms applying to voluntarily cancel, and 47 to modify, their permissions to carry out regulated activities.
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.”
