The FCA’s new cancellation and variation power
Posted on 8 Jun 2022
The Policy Statement issued in May 2022 announced new powers for the FCA to cancel or vary an authorised firms’ regulatory permissions. This change has taken place following consultations which took place last year.
The FCA has outlined within the Policy Statement that these powers will be used where authorised firms do not appear to be carrying on regulated activities for which they have permission and have not responded to FCA’s warnings.
It is important to note that this new power will not apply to all regulated firms.
Derived from the Financial Services Act 2021, the FCA now has the power to cancel or vary, without application, firms which are authorised or deemed to be authorised, under the temporary permissions or supervised run-off regimes, under Part 4A of the Financial Services and Markets Act 2000 (FSMA).
These changes will not apply to firms authorised by the Prudential Regulation Authority or firms not authorised under Part 4A of FSMA. However, certain individuals who hold approved functions at Part 4A authorised firms could be affected by the changes.
The FCA has always adopted the ‘use it or lose it’ approach, but in some situations had to wait 12 months to be able to act. The FCA are now able to update the Financial Services Register to vary or cancel a firm’s permissions without the firm’s consent or the need to wait 12 months.
The FCA believes these new powers will help to reduce the risk for consumers by providing more accurate information, so allowing consumers to make better informed choices. The FCA have updated the Handbook describing their new powers, which are contained within Schedule 6A of FSMA. FCA also provide guidance on their approach to exercising these powers.
All authorised firms are urged to review and assess their current permission profile to identify any redundant permissions for removal, in any case, firms should be carrying out this review annually.
The FCA recommends that authorised firms should request the removal of permissions for regulated activities which the firm no longer makes use of. If no FCA regulated activity is being undertaken by a firm, the recommendation is for the firm to consider cancelling their permission.
It is better for firms to be in control of their permission profile than the FCA.