FCA to clamp down quicker on firms using permissions to dupe consumers

The City watchdog is clamping down on firms using regulatory approvals to dupe consumers.

The Financial Conduct Authority (FCA) is set to use new powers to allow it to revoke businesses’ permits to carry out regulated activity quicker, it announced today.

The regulator is now able to cancel or change a firm’s permission if it has not taken appropriate action 28 days after warning a business it may have its privileges cut off .

Before the new powers, confirmed under a recent law change, it could take three months or longer to cancel a firm’s permission, a person close to the situation told City A.M. 

Being able to zero in on companies abusing their FCA permission quicker “will strengthen consumer protection by reducing the risk of consumers misunderstanding or being misled about their exposure to financial risk and how much consumer protection they have,” the watchdog said.

The regulator is concerned companies are using permissions to convince consumers they are buying regulated products that are covered by the Financial Service Compensation Scheme when they are not.

Permissions have also been used to “market high risk products that are unregulated by the FCA,” the organisation said.

Allowing the FCA to move swiftly on firms that risk harming consumers is part of wider drive by policy makers to shake out fraudulent activity from the financial services market.

It is also in response to the London Capital and Finance mini-bond mis-selling scandal that has resulted in retail investors losing millions of pounds.

The move also supports the FCA’s drive to improve oversight under its new consumer duty. 

The regulator has launched a ‘use it or lose it’ initiative designed to ensure appropriate permissions are assigned to the correct companies. It has probed thousands of firms under the campaign.

“These new powers will enable us to take quicker action to cancel permissions that are not used or needed,” Mark Steward, executive director of enforcement and market oversight at the FCA, said.