FCA Targets over 700 Unused Financial Licenses in Consumer Safety Drive

by Damian Chmiel
  • The UK regulator revokes unused financial licenses for consumer safety.
  • New laws have been in force since 2022.
FCA
Bloomberg
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Last year, the UK's financial market regulator, the Financial Conduct Authority (FCA ), accelerated the process of revoking licenses from financial firms that were not utilizing them. The watchdog claimed this is to protect consumers from the increased risks associated with the operations of such companies. According to the latest data, the institution has exercised this right over a thousand times, affecting the operations of 762 companies.

FCA Affects Hundreds of Firms Not Utilizing Their Licenses

Financial News approached the FCA with a request under the Freedom of Information Act on how often the regulator used its rights to suspend the licenses of companies that do not carry out operations arising from their authorizations. The FCA informed that, as of 16 October 2023, it had influenced the activities of 1,100 individual business lines. Over 300 entities either applied independently to cancel their licenses or had them removed by the regulator.

In the past, the FCA could cancel a company's license within 12 months of sending its first warning, but now it can do so in 28 days.

"Businesses are required to prove they are carrying out the regulated activities they are permitted to or face losing this permission," the UK market watchdog stated a year ago.

However, how can a licensed firm, even one that does not use its licenses, harm consumers?

FCA Cares for Consumer Protection

The regulator believes that the updated power will strengthen consumer protection by reducing the risks of misunderstanding or misleading information about financial risks. Moreover, it will expedite the regulatory actions in the case of inappropriate use of permission.

"Businesses with permissions they don’t need or use risk misleading consumers," said Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA.

It turns out that some regulated firms use their licenses to attract investors to products that are not regulated, thereby misleading them. This was the case with London Capital and Finance, whose collapse cast doubt on the future of £236 million belonging to investors.

The FCA is also actively working in the field of promoting services and products of financial firms. In Q3, the FCA reviewed 1,211 financial promotions, with 75% being part of proactive monitoring.

Last year, the UK's financial market regulator, the Financial Conduct Authority (FCA ), accelerated the process of revoking licenses from financial firms that were not utilizing them. The watchdog claimed this is to protect consumers from the increased risks associated with the operations of such companies. According to the latest data, the institution has exercised this right over a thousand times, affecting the operations of 762 companies.

FCA Affects Hundreds of Firms Not Utilizing Their Licenses

Financial News approached the FCA with a request under the Freedom of Information Act on how often the regulator used its rights to suspend the licenses of companies that do not carry out operations arising from their authorizations. The FCA informed that, as of 16 October 2023, it had influenced the activities of 1,100 individual business lines. Over 300 entities either applied independently to cancel their licenses or had them removed by the regulator.

In the past, the FCA could cancel a company's license within 12 months of sending its first warning, but now it can do so in 28 days.

"Businesses are required to prove they are carrying out the regulated activities they are permitted to or face losing this permission," the UK market watchdog stated a year ago.

However, how can a licensed firm, even one that does not use its licenses, harm consumers?

FCA Cares for Consumer Protection

The regulator believes that the updated power will strengthen consumer protection by reducing the risks of misunderstanding or misleading information about financial risks. Moreover, it will expedite the regulatory actions in the case of inappropriate use of permission.

"Businesses with permissions they don’t need or use risk misleading consumers," said Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA.

It turns out that some regulated firms use their licenses to attract investors to products that are not regulated, thereby misleading them. This was the case with London Capital and Finance, whose collapse cast doubt on the future of £236 million belonging to investors.

The FCA is also actively working in the field of promoting services and products of financial firms. In Q3, the FCA reviewed 1,211 financial promotions, with 75% being part of proactive monitoring.

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