FCA to speed up removal of firms that do not use their regulatory permission
What has happened?
The FCA announced in May 2022, with the issue of its Policy Statement PS22/5, that it is to use new powers available to it to more swiftly cancel or change FCA regulated firms’ permissions. This change applies only to solo-regulated FSMA firms and not, for example, to payment services firms.
What are the key points of the Policy Statement?
This new power is available following a change in the law allowing the FCA to streamline and shorten the removals process. At its discretion, the FCA will be able to provide a firm with two warnings if it believes it is not using (or, where relevant, that its Appointed Representatives are not using) its regulatory permission, and it will then be able to cancel the permission without the firm’s consent, or change it, no less than 28 days after the first warning if the firm has not taken appropriate action. A right of appeal against this process may be made available to firms.
This change is intended 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. The focus of the FCA’s attention will be on firms having retail clients.
The new process 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, for example, when a permission is being wrongfully used to market high-risk products that are not FCA regulated.
Where a firm fails to pay its regulatory fees, submit returns, or complete annual declarations, the FCA may view this as an indicator of a lack of regulated activity, which may lead to permissions being removed through the use of this new power.
The new power supports the FCA’s existing ‘use it or lose it’ initiative, which has seen the FCA carry out 1,090 assessments since May 2021 to see whether firms are undertaking the 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 FCA regulated activities.
As “next steps”, the FCA suggests that firms that may be within scope of the Policy Statement should consider asking the FCA to cancel their permissions or remove unnecessary activities, as the case may be.
How can we help you?
If you’d like to know more about how we can help you become FCA regulated, support with your regulatory permission arrangements or any other regulatory compliance issues, our specialist team is here to help.
Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.