You might well wonder why a commentary on the proposed FCA rules on unused permissions should start with a reference to lab rats and love?
For that you can thank the late Dr Marian Diamond, a pathbreaking neuroscientist whose research included a study of Albert Einstein’s preserved brain, and a career in the lab where she chartered the human brain’s dynamic, beautiful and infinite complexity.
Her studies prompted her to give new meaning to the phrase, “use it or lose it”, when she developed the theory of brain plasticity. She identified five factors crucial to brain development including and perhaps surprising for a scientist … love.
Whilst love is not the motivation for the FCA in their use it or lose it strategy, they are instead focused on a desire to tackle consumer harm.
Two strikes …
Following a change in the law, this new power will allow the FCA to streamline the removals process. As they say “We are reminding firms of their obligation to regularly review regulatory permissions to ensure they are up to date and removed where they are not needed.”
The regulator will give the firm two warnings if it believes it is not using its regulatory permission. Thereafter it will be able to cancel the permission, or change it, if the firm has not taken appropriate action.
Where a firm fails to submit returns, complete annual declarations or pay its regulatory fees, the FCA can view these as signs of lack of regulated activity and trigger the permission being removed under this new power.
To date the FCA has carried out over one thousand assessments to establish whether firms are undertaking the financial activity for which they have permission. 264 firms have applied to voluntarily cancel their permissions and a further 47 have sought to modify their permission profile.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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.”
The FCA recognises the Financial Services Register is a valuable source of information for consumers and having learned lessons from the collapse of the mini bond provider London Capital & Finance PLC the regulator is focussed on ensuring investors are not misled as to what products and services are regulated and therefore ultimately protected by the FSCS.
Important, act now!
Reviewing your firm’s permissions is vital. Where you have a Part 4A permission, but have not carried on any regulated activities for 12 months or more and have no current plans to do so, you must apply for cancellation using Connect.
