Under new powers, the FCA has announced that it plans to more swiftly cancel or change the regulated activities firms are permitted to do. Furthering its ‘use it or lose it’ approach, the FCA will provide firms with two warnings if it believes they are not using a regulatory permission they hold. 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 FCA states that this will 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, such as believing unregulated activities are covered by the Financial Services Compensation Scheme when they are not.
The FCA will be able to cancel a firm's permission when it is no longer required or where firms use their permission inappropriately, such as where a permission is being wrongfully used to market high risk products that are not regulated by the FCA. Regulated firms offering unregulated products, such as cryptoassets, should tread carefully.
The announcement also details failures to pay regulatory fees, submit returns or complete annual declarations as possible indicators of a lack of regulated activity which may lead to permission being removed.
The FCA has carried out 1,090 assessments since May 2021 to see whether firms are undertaking the financial activity for which they have permission, resulting in 264 firms applying to voluntarily cancel, and a further 47 to modify, their permission. These new powers demonstrate the FCA putting its commitment to being a more innovative, adaptive and assertive regulator into practice.
"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." - Mark Steward, Executive Director of Enforcement and Market Oversight, FCA