New powers that would enable the FCA to move faster to remove regulatory permissions no longer used by financial services firms should serve as a reminder to advisers to ensure their regulatory information is up to date or face £250 fines.
This is according to Branko Bjelobaba, principal at consultancy Branko, who spoke to Health & Protection in the wake of the publication of new draft guidance from the FCA.
The FCA explains the change aims to help to prevent scams and to ensure the FS Register presents a clearer picture of the permissions firms hold. Firms are required to confirm that the information on the FS Register is accurate on an annual basis.
This new power, given to the FCA via the Financial Services Act 2021, will streamline and shorten the process of removing firm permissions and ensures the FCA can start the cancellation process as soon as it considers permissions are not being used, by serving 14 days’ notice on a firm. The FCA will then be able to vary or cancel permissions after a month.
The FCA has already carried out a ‘use it or lose it’ exercise with firms – reminding them of their obligation to review regulatory permissions and ensure they are up to date or removed if not needed.
As part of the FCA’s work firms that have not used their permissions for 12 months or more are at risk of having them cancelled via the existing cancellations process. The work forms part of the FCA’s response to tackle issues raised by Dame Elizabeth Gloster’s review into the regulation of London Capital & Finance (LC&F).
The FCA consultation runs until 29 October 2021.
Preventing consumers from being misled
Commenting on the new power, Mark Steward, executive director of enforcement and market oversight at the FCA, said: “We want to use this power to take quicker action to prevent consumers being misled.
“It is part of our transformation and drive to be more assertive, drawing on an innovative approach and using new streamlined processes to make important regulatory interventions.
“Firms can and should apply to have their permissions cancelled if they no longer plan to use them but many fail to do so.
“We understand that business models may evolve over time and there may be valid reasons why regulatory permissions are not being used, but unless firms notify us and keep their permissions up to date, they will risk losing market access.”
Ensuring information is up to date
This is a sentiment echoed by Bjelobaba, who in commenting on what the new power means for health and protection advisers, told Health & Protection he did not think the change would be hugely troublesome for them.
“There are five permissions when it comes to general insurance… It depends on what you do but generally, a health insurance intermediary doesn’t get involved in the claims because that’s dealt with by the insurer so they don’t need that permission and also most health insurance intermediaries do not actually place people on cover – that’s done by the insurer so they don’t need that permission so most will only have five permissions and it’s most unlikely that they hold client money so they don’t need permission to do that.
“So when they applied for authorisation, they would have applied for five plus one and now every year they’re required to ensure that their permissions and the information about the firm and the individuals is correct and up to date. You have to go into the system called Connect and you validate the information at least once a year. They will remind you and they will fine you £250 if you don’t do it.
“It’s not momentous. Any firm needs to be up to date with the regulatory information as presented on the directory.”