The FCA can now strip an advisory firm of its ‘unused’ permissions in just 14 days. Apricity’s Jake Miller looks at why, how and the implications for firms.
After speaking on this for some time, the FCA has now gained new permissions powers (since May 2022) which are held within their arsenal as part of the ‘use it or lose it’ initiative.
For firms, this means that if you have permissions which you no longer use, the FCA can remove them. As soon as the FCA feel a permission is no longer being utilised, they will issue 14 days’ notice to the firm, and permissions could then be removed or varied within as little as one month.
This means the FCA will not have to rely as much on firms to ensure they have the correct permissions.
It also means that consumers will be able to see exactly what a firm does and does not offer. Incorrect listing of permissions can mislead consumers about the level of protection offered by a firm or give credibility to a firm’s unregulated activities.
Action to take
Firms should now be considering what permissions they have, and what they actually use. By taking this action, firms will not be left with only 14 days to decide if they need all the permissions and provide evidence that they are still using them. Having more time to consider your permissions will allow for a less pressured thought process and potential loss of those you actually need.
With this now being legislation, it is wise to assess any under-used permissions. Generally, there are a few common suspects. These are: equity release, defined benefit transfers and structured products. If these are not something you do (or rarely do), should you still be offering them to clients?
Ironically, the ‘use it or lose it’ statement here can be applied to a firm’s knowledge of a product or service. For example, if you are only doing one equity release case a year, are you going to still remember the process for doing the work? Chances are, if you’re only doing a couple of cases here and there, you may not be as up-to-date on that area as you should be, possibly then leading to potential complaints.
You can always reapply for permissions if needed. This is especially important when you think of the Consumer Duty piece that is coming into force from this July – keeping everything clear and end-client focussed is the way all firms should be thinking at this point.
Overall, I imagine that firms themselves are going to be more proactive with monitoring their permissions to avoid feeling rushed with a 14-day notice period. However, I do have to question whether the FCA will have the resources to do this. With current strains on other elements of the FCA’s responsibilities and services, I find it a stretch to believe that there will be anyone scalping the lists of firms’ permissions daily. When we are already experiencing longer wait times from the FCA, adding more jobs to their list will likely not be doing anything positive for turnaround times.
