Legislative background
In the Explanatory Notes to the FS Act the Government expressed concern about the integrity of the Financial Services Register. They stated that:
The accuracy of the Register is integral to ensuring consumers considering a financial product or service have the required information to take informed decisions about who they deal with. If the Register is inaccurate, there is a risk that fraudulent individuals or firms will clone inactive firms to scam consumers. Improving the speed with which the FCA can cancel the authorisation of a firm that is no longer carrying on regulated activities, and reflecting this on the Register, will help to manage that risk. It will also allow the FCA to use resources more efficiently to better and more swiftly deliver in the public interest.
The change made by the FS Act sits in the new Schedule 6A to the Financial Services and Markets Act 2000 (FSMA).
Streamlining
In the past the FCA reminded firms to regularly review their regulatory permissions. The change in the law allows the FCA to adopt a more streamline process. The FCA will give firms two warnings. The FCA can then cancel or change permissions, 28 days after the first warning if the firm has not taken suitable action.
On the up
The existing use or lose it initiative has resulted in the FCA undertaking 1,090 assessments since May 2021. Of those firms, 264 applied to make a voluntary change and 47 applied to change their permission for regulated activities.
The Enforcement and Market Oversight team at the FCA are clear that if permissions are not needed or used, firms should seek to cancel them. With their new powers in place, we expect to see figures for cancellations and changes rising.
