UK FCA empowered to remove brokers’ permissions in 28 days
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.
The UK Financial Conduct Authority has announced it is speeding up the removal of firms that don’t use the financial watchdog’s regulatory permission, thus strengthening consumer protection.
Businesses are now required to prove they are carrying out the regulated activities they are permitted to or face losing this permission. Failing to do so, following two warnings, will lead to cancellation of the regulatory permission 28 days after the first warning.
New power enhance FCA’s “use it or lose it” initiative
The new FCA power came into effect following a change in the law allowing the FCA to streamline and shorten the removals process in order to 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.
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.’
The FCA is to use new powers to more swiftly cancel or change what regulated activities firms are permitted to do, these are known as permissions. This will also allow the FCA to act quickly when cancelling a firm’s permission when it is no longer required and to swiftly respond to inappropriate uses of permission.
Before taking the ultimate move, the regulator will provide a firm with two warnings if it believes it is not using its regulatory permission. The FCA 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.
The financial watchdog says it will observe indicators of lack of regulated activity, such as failing to pay regulatory fees, submit returns or annual declarations, which may lead to permission being removed.
The FCA’s existing ‘use it or lose it’ initiative has led to 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.