The Financial Conduct Authority (FCA) will use its new powers to more swiftly cancel or change what regulated activities firms are permitted to do. Businesses are required to prove they are carrying out the regulated activities they are permitted to or face losing their permission.
This new power is available following a change in the law allowing the FCA to streamline and shorten the removals process. The FCA will provide a firm with two warnings if it believes they are not using their regulatory permission, and 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.
This will strengthen consumer protection by reducing the risk of consumers misunderstanding or being misled about their exposure to financial risk and how much protection they have. For example, believing unregulated activities are covered by the Financial Services Compensation Scheme when they are not.
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 also lead to permission being removed.
The new power supports the FCA’s existing ‘use it or lose it’ initiative, which has seen it carry out 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.