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The FCA has recently closed the book on its consultation around unused regulatory permissions. As part of its work to shut loopholes and protect consumers from scams, and in the wake of wrongdoings such as that at London Capital & Finance, the regulator is pushing forward with its ‘use it or lose it’ approach. Reviewing your permissions now to make sure you can justify them could save considerable time and effort later.
The increased scrutiny on regulatory permissions is targeted at those organisations that on one hand offer fully regulated products and services and on the other, appear to have redundant permissions which could have the effect of misleading customers, especially if firms are offering unregulated services which customers could ‘assume’ would come with regulatory protections.
The regulator wants companies to take the lead here and be in control of declaring the permissions they do and don’t use. It wants firms to think and plan ahead and be prepared to answer questions if their permissions are not up to date.
With new powers granted via the Financial Services Act 2021, the FCA aims to act quickly on permissions, cancelling them with as little as 14 days’ notice where it sees them unused. It’s therefore important to begin conducting comprehensive reviews and checks. You will need to weed out unnecessary permissions, whilst making sure that what’s in place aligns to your strategy and business model. Being proactive with the regulator is crucial.
Historically it has been typical for companies to ‘over permission’. This was done to give room for manoeuvre; to execute quickly should a market opportunity materialise. The FCA is now clear that firms should only have permissions for business lines where they have clear strategic plans accompanied by the requisite systems and controls and, of course, competent people to execute them.
If you have a real plan to expand into an area of permission that you are currently not using then it makes sense to hold onto the permission, as to lose it, and then have to reapply, can take considerable time. This situation is currently compounded given that the regulator is busy contending with Brexit, COVID-19 and the Temporary Permission Regime.
To save needing to reapply, you must therefore be prepared to justify all your permissions going forward with the right planning, controls and staff. Not planning your approach could cause real difficulties and find the FCA taking unilateral action to remove your unused regulatory permissions: and when they’re gone, they’re gone.
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