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FCA gains ability to strike off firms within a month that don’t use regulatory permissions

  • 19/05/2022
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FCA gains ability to strike off firms within a month that don’t use regulatory permissions
The FCA will use a three strike method to change or revoke permissions of registered firms that don’t use their regulatory protection within 28 days of a first warning.


The new powers set out in Schedule 6A to Financial Services and Markets Act 2000 (FSMA), have been in the works since 2016. They now allow the FCA to cancel or change a firm’s regulatory permission 28 days after the first of two warnings, and also to reverse or annul previous decisions.

Previously, the FCA had to wait 12 months or more to start the process. This created a loophole for potential fraudsters that get on the register and use it to trick consumers into a false sense of security around unregulated activities, that aren’t covered by the Financial Services Compensation Scheme.


‘Use it or lose it’

The new power supports the FCA’s existing “use it or lose it” initiative, which has seen the regulator carry out 1,090 assessments since May 2021, resulting in 264 firms applying to voluntarily cancel, and a further 47 to modify their permissions.

Authorised under the Financial Services Act 2021, the “use it or lose it” initiative allows the FCA to “vary or cancel the statutory permissions to conduct FCA-regulated activities of many FCA-authorised firms”. This includes firms who appear to be carrying on no FCA-regulated activities which they have permissions for or have not responded as directed to the regulator’s warning notices.

The changes and or cancellations are recorded on the Financial Services Register.


Where the powers apply

The powers only apply to firms authorised or deemed, under the temporary permissions or supervised run-off regimes, to be authorised by the FCA under Part 4A of the FSMA. These firms were asked to review their permissions in January 2021.

Firms can get in trouble for inappropriate uses of permissions and a failure to pay regulatory fees.

Inappropriate uses of permissions include 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 may view these as indicators of a lack of regulated activity, which may lead to permission being removed through use of this new power.

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.

“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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