Cancellation of permission to carry on regulated activity Changes to the Financial Conduct Authority’s cancellation of authorisation process
Firms carrying on a "regulated activity," as defined in section 22 of FSMA must be authorised to do so in the UK by either the FCA or the PRA or be exempt from authorisation. The FCA keeps a public record of authorised firms, individuals and other bodies that are, or have been, regulated by the PRA and/or the FCA. This is known as the Financial Services Register (the Register).
	The Register allows consumers to check that firms offering financial products and services are authorised. It provides those firms’ contact details and the products and services they are authorised to provide, and whether those firms, or certain individuals at the firms, have been sanctioned or had other action taken against them.
	The accuracy of the Register is integral to ensuring consumers considering a financial product or service have the required information to take informed decisions about who they deal with. If the Register is inaccurate, there is a risk that fraudulent individuals or firms will clone inactive firms to scam consumers. Improving the speed with which the FCA can cancel the authorisation of a firm that is no longer carrying on regulated activities, and reflecting this on the Register, will help to manage that risk. It will also allow the FCA to use resources more efficiently to better and more swiftly deliver in the public interest.
	In July 2020, the Government published a policy statement (HM Treasury, Policy paper, ‘Changes to the FCA’s cancellation of authorisation process’, July 2020) in which it sought views on proposed changes to the FCA’s cancellation or variation of authorisation process. The Act makes amendments to provide the FCA with the mechanism to cancel or vary authorisation more quickly when firms stop carrying on regulated activities. The Act also provides for the FCA’s annulment of the cancellation or variation of a firm’s authorisation.
	The grounds for the FCA to cancel a firm’s authorisation are set out in Part 4A of FSMA. Authorised firms are required to give the FCA prompt notice if they intend to cease carrying on one or more regulated activities permanently. Where a firm has not provided such a notification but the FCA believe that it is no longer carrying on a regulated activity, the FCA must demonstrate that one of the grounds set out in statute is met in order to cancel the firm’s authorisation. This takes considerable time and resource, delaying the process of cancelling the authorisation of inactive firms.
	The Act provides an additional process to sit alongside the existing cancellation procedure, to allow the FCA to streamline those cases where it appears to the FCA that a firm is no longer carrying on a regulated activity and cancel or vary their authorisation. This could be where the firm has failed to pay its fees or levies or provide information to the FCA as is required in the FCA Handbook. The Act provides the FCA with the mechanism to restore a firm’s authorisation or varied permission upon a firm’s application, where it considers it just and reasonable to do so. This application falls within the scope of the FCA’s power to provide for the payment of fees in paragraph 23 of Schedule 1ZA FSMA.
	The FCA may annul the cancellation or variation of a firm’s authorisation unconditionally, subject to conditions, with one or more regulated activities described differently or removed, or refuse to restore a firm’s authorisation or varied permission. Where the FCA refuses to annul the cancellation or variation of a firm’s authorisation or permission, the firm may refer the matter to the Upper Tribunal. The Upper Tribunal may give directions and make provision for placing the firm, and other persons, in a similar position, as if the authorisation had not been cancelled or the permission had not been varied. The Act also provides the FCA with the ability to refer to the Upper Tribunal an FCA decision to annul the cancellation or variation of a firm’s authorisation or permission.
	The change only applies to firms both authorised and regulated solely by the FCA. Firms regulated by the PRA, often described as dual regulated firms, are not in scope of the changes.