Use it … or lose it

In its June quarterly consultation paper, the FCA announced proposals to make amendments to the Handbook relating to its powers to vary or cancel the permissions of firms authorised under Part 4A of the Financial Services and Markets Act 2000 (FSMA) to carry on FCA regulated activities.

In the Financial Services Act 2021, which has relevantly amended FSMA, the FCA has been provided with an additional process through which it can vary or cancel the permissions of firms we have authorised under Part 4A. This new process will sit alongside the existing cancellation and variation process in FSMA.

The Treasury will specify the date from which this new power will apply in a commencement order.

This follows on from January 2021, when the FCA reminded firms of their obligation to regularly review regulatory permissions to ensure they are up to date and, importantly, removed where not needed. This is consistent with the actions the FCA has been taking with firms involved in defined benefit pension transfer advice over the past eighteen months or so, where many firms have been ‘encouraged’ to vary their permissions so that they cannot continue to advise on DB transfers.

Use it or lose it

The FCA has announced their intention to use the new power, where the conditions described below are satisfied, in a ‘use it or lose it’ exercise.

The new cancellation and variation power will allow the FCA to vary or cancel an FCA-authorised firm’s Part 4A permission where:

  1. the firm appears to us not to be carrying on any FCA-regulated activity, including, but not only, where the firm has failed to pay a periodic fee or levy, or to provide the FCA with information, such as an annual return, required under the Handbook; and
  1. the FCA has served on the firm two notices and the firm has not responded or taken other steps as directed.

Why this is happening

The new power will allow the FCA to more quickly cancel or vary the permissions of Part 4A authorised firms who appear to no longer be carrying on FCA-regulated activities and to reflect this cancellation or variation on the Financial Services Register. The Register is a valuable source of information for anyone who wants to check the details of firms working in regulated financial services. It can thereby help consumers to avoid financial harm such as scams.

Firms that have not used their regulatory permissions to earn any income for the last 12 months are at risk of having their authorisation cancelled, to reduce the risk of firms having a permission to carry out regulated financial services purely to add credibility to their unregulated activities.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

For information.

Action Required By You

If you want to feedback on these proposed changes, do so by 5 July 2021
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About the Author

John is Chartered Financial Planner and a Fellow. With a wealth of financial services experience, including as a successful adviser, John is a long standing ATEB consultant, with a proven track record of delivering robust compliance and T&C solutions across all regulatory disciplines.

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