FCA to move faster to remove unused firm permissions
The FCA has issued a press release and has confirmed on its website that it has published draft guidance on a new power that allows it to move faster to remove regulatory permissions that are no longer being used by financial services firms. The FCA believes that Incorrect or outdated permissions on the Financial Services (FS) Register can mislead consumers about the level of protection offered by a firm or give credibility to a firm’s unregulated activities.
We are aware that the FCA has written to some firms indicating an intention to remove or vary Permissions. A copy of the correspondence (de-personalised) received by one firm is attached. Some firms will, legitimately, declare a ‘nil return’ for regulated income within their RMARs they might receive this letter as a matter of course; for example, a firm that is a secondary intermediary, carrying on regulated activities, but currently not earning any income from the regulated activities that they carry out.
The new power, granted to the FCA via the Financial Services Act 2021, will streamline and shorten the process of removing firm permissions. The FCA will 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 will then be able to vary or cancel permissions after 1 month.
The FCA has already undertaken a ‘use it or lose it‘ exercise with firms – reminding them of their obligation to review regulatory permissions and ensure they are up to date or removed if not needed – and is now consulting on how we will use a new power to help us more quickly remove permissions from firms where they are not being used.
The FCA wants to use this power to take quicker action to prevent consumers being misled by outdated permissions on the Financial Services Register, which the FCA believes can provide false assurances about the level of protection offered by a firm or give credibility to unregulated activities.
The FCA sees this as part of its transformation and drive to be more assertive and innovative, using an innovative approach and using new streamlined processes to make important regulatory interventions.
As part of that work firms that have not used their permissions for 12 months or more are at risk of having them cancelled via the existing cancellations process. It is part of the FCA’s response to tackle issues raised by Dame Elizabeth Gloster’s review into the regulation of London Capital & Finance (LC&F).
Changes affect only firms authorised by the FCA under Part 4A of FSMA, excludes payments and e-money firms and firms authorised by the PRA.
The consultation will run until 29th October 2021. We recommend that firms read and respond to the consultation by 29 October 2021. Viewed alongside the recently published decision-making consultation mentioned above, this appears to be the next step in perhaps a gradual process of the FCA transforming into a far more intrusive Regulator that will have power in its own right to intervene to prevent firms causing customer harm.