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As we hit another deadline for firms to report their fee tariff data, many may feel that a familiar annual return doesn’t hold surprises for them. But it’s worth pausing to consider how the FCA will use the data you have given them, particularly in the context of streamlined rules for removing permissions, implemented in May last year.
These rules allow the FCA to tell firms to ‘use or lose’ their permissions, and unilaterally remove them where it doesn’t see evidence of sufficient activity. In recent weeks, we have seen examples of clients receiving enforcement notices due to a lack of activity. It’s highly likely that these were identified from reviewing fee tariff data submissions. The data makes it incredibly easy for the regulator to see what firms are – and are not – doing.
This approach forms part of the broader direction of travel for the FCA, as it looks to prevent firms using permissions to mislead consumers when the bulk of their activity is not actually regulated. The regulator will likely start by focusing on firms that provide no evidence of any activity, however there will also be heightened scrutiny on those firms that are only using some of their permissions.
For some firms, particularly those working in real estate where transactions take many months to conclude even where market conditions are good and prices are not volatile, this can present serious issues.
And it could present a widespread problem given previous practices by those applying for authorisation. In the past, many firms have applied for permissions ‘just in case’ they wanted to use them later or expand their offering. Firms have already had to change their approach to authorisation, but for those already authorised there is still a lot to consider.
What to do if you’re worried about your permissions
If you are found to have unused permissions, you will need to consider your response. Short of voluntarily cancelling the permission, you’ll need to consider if you can provide robust evidence that your future activity (meaning in the next three months) will include the use of these unused permissions. The FCA will not just take your word on this – the regulator will require hard evidence that you are going to do what you say. That means providing a business plan and potentially drafting marketing material.
If you cannot come up with this evidence, then they you’ll need to go down the cancellation route. This means acting quickly to ensure that it is a voluntary cancellation, which is a simple process that Bovill can support with. A public enforcement would remain as a permanent red flag on your firm’s record. It will make securing permissions in the future more difficult, and must be avoided.
If you think this could apply to you, you need to be prepared as the regulator will work to short timelines where it identifies an unused permission. If your firm doesn’t want to lose any permissions, you may only have a few weeks to pull together the necessary evidence. Given the high bar that has been set, this is not something that can be quickly worked up.
This will be especially challenging for firms in lines of business where deals can take a long time to complete, such as real estate, extending the time between receiving a permission and actually using it. Looking ahead and being proactive is therefore vital.
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