The FCA proposed in its Consultation Paper 21/16, issued in June 2021, to amend its Handbook as it relates to the variation and cancellation of permissions given to firms authorised under Part 4A of the Financial Services and Markets Act 2000 (FSMA). This will include firms deemed to have Part 4A permission under the temporary permission and supervised run-off regimes.
In the Financial Services Act 2021, which amended FSMA, the FCA was provided with an additional process through which it can vary or cancel the permissions of FSMA-authorised firms. The Treasury will specify the date from which this new power will apply in a commencement order. It will not apply to PRA-authorised firms. The new power will allow the FCA to act more quickly to cancel or vary permissions where it considers that firms are no longer carrying on any regulated activities. The FCA is consulting on proposed associated amendments to the Decision Procedure and Penalties manual (DEPP) and the Fees manual (FEES).
Feedback on these proposed changes is requested by 5 July 2021. The FCA also plans to consult separately on associated amendments to other parts of the Handbook.
The FCA intends, in response to the recent review undertaken by Dame Elizabeth Gloster into its regulation of London Capital & Finance Plc, to undertake a ‘use it or lose it’ exercise; firms that have not used their regulatory permissions to earn any income for the last twelve months are at risk of having their authorisation cancelled, to reduce the risk of firms having a permission to carry out regulated financial services purely to add credibility to their unregulated activities. In January 2021, the FCA reminded firms of their obligation to regularly review their regulatory permissions to ensure they are up to date and removed where not needed. It intends to use the new power, where the conditions described below are satisfied, in this ‘use it or lose it’ exercise. The power will allow the FCA to vary or cancel an FCA-authorised firm’s Part 4A permission where;
This new process will sit alongside the existing cancellation and variation process in FSMA. Where the FCA uses the new power to cancel or vary a firm’s permission, that firm can apply to have that decision annulled. The application for annulment must be made within twelve months of the cancellation or variation and it will need to be made in the manner directed by the FCA. The FCA may annul the cancellation or variation subject to conditions, but it may only annul the decision where it considers it just and reasonable to do so.
Where the FCA proposes to refuse to annul, it will give the firm a warning notice and where the FCA decides to refuse to annul, it will give the firm a decision notice. Where a firm receives a warning notice, it will be given the right to respond by making representations that will be considered by the FCA decision-maker before a decision whether to annul is made. If the FCA grants the firm’s application to annul, the effect of annulment is that the cancellation or variation under the new power is treated as never having occurred.
If you’d like to know more about how we can help you with your firm’s Part IV permissions or any other regulatory compliance issues, our expert team is here to help.
Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.