The Financial Conduct Authority is to speed up removal of regulated activities from firms failing to use their permissions.

The regulator will use a new power granted to it following a change in the law allowing it to streamline and shorten the removals process.

The aim is to improve consumer protection around firms suspected of hanging on to permissions they no longer need.

Firms will be required to prove they are carrying out the regulated activities they are permitted to use or face losing the permission.

The FCA will provide firms with two warnings if it believes they are not using their regulatory permissions.

Failure to take action following the two warnings will lead to cancellation of the permission 28 days after the first warning.

The FCA said the move 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 new expedited process will also allow the FCA to swiftly respond to inappropriate uses of permission such as when a permission is being wrongfully used to market high risk products not regulated by the FCA. 

Where a firm fails to pay its regulatory fees, submit returns or complete annual declarations, the FCA said it may view these as indicators of a lack of regulated activity. 

Mark Steward, executive director of enforcement and market oversight at the FCA, said:  “Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed. Firms should regularly review their permissions, ensure they are correct, and they are acting in accordance with them. If they are not needed or used, they should seek to cancel them.”

The new power also supports the FCA’s existing ‘use it or lose it’ initiative, which has seen the FCA carry out 1,090 assessments since May 2021 to see whether firms are undertaking the financial activity for which they have permission.

So far, the initiative has resulted in 264 firms applying to voluntarily cancel, and a further 47 seeking to modify their permissions to carry out regulated activities.