FCA stops UK operations of 16 CFD providers that entered TPR in 2021
The UK Financial Conduct Authority (FCA) has placed restrictions on twice as many firms in the investment market compared to last year, as part of its strategy designed to prevent harm in the consumer investment market. The restrictions include preventing firms from promoting and selling certain products or providing specific services like advice on defined benefit pension transfers.
The FCA stopped 17 firms and seven individuals attempting to obtain a new FCA authorisation in the investment market where phoenixing or lifeboating was suspected. This is where firms or individuals try to avoid the consequences of having provided unsuitable advice by moving to or setting up a new firm.
The regulator also stopped the UK operations of 16 Contracts for Difference (CFD) providers, that had entered the UK’s temporary permissions regime in 2021, where suspected scam activity was detected, or consumers were encouraged to trade excessively to generate revenue. Without FCA action consumers could have lost around £100m a year.
The work forms part of the FCA’s updated Consumer Investments strategy, which is aimed at helping people invest with confidence, while seeking to reduce the number of people who are persuaded to invest in products that are too risky for their needs and to slow the growth in investment scams.
The actions the FCA is taking to prevent harm in the consumer investment market are aligned to key commitments in its wider 3-year strategy, including enabling consumers to help themselves, dealing with problem firms and reducing and preventing financial crime.
Sarah Pritchard, Executive Director of Markets at the FCA, said:
‘In the last year we have maintained our focus on acting assertively and innovatively to tackle harm – we prevented 1 in 5 firms from entering the Consumer Investments market and we have taken action against unauthorised firms with a 40% increase in the number of consumer alerts issued. Setting high standards and acting quickly to crack down on problem firms will help ensure market and consumer confidence, supporting the integrity and growth of UK financial services.’
As well as acting more assertively to crack down on firms that are not meeting the FCA’s expectations, today’s update shows that the FCA is:
- Being tough at the Authorisations gateway to prevent firms that could cause harm from entering the market. One-in-five applications from firms wanting to join the consumer investment market in 2021/22 were not approved or were withdrawn.
- Issuing more consumer alerts to warn consumers of risks. The FCA published over 1,800 consumer alerts about unauthorised firms or individuals last year, 40% more than the previous year.
- Stepping up its ScamSmart and InvestSmart campaigns to reach millions of consumers. 59% more consumers used the FCA’s online ScamSmart resources last year to help them avoid scams.
- Being more innovative in using data to tackle online fraud faster, including by scanning 100,000 websites every day and acting where a scam is suspected.
Over the last year, the FCA has introduced new rules to protect consumers from harm, including strengthening financial promotions rules and introducing the Consumer Duty, and has consulted on proposals for a compensation scheme for former members of the British Steel Pension Scheme who received unsuitable advice.
It will also consult later this year on a more proportionate advice regime for investing in stocks and shares ISAs and following that the FCA intends to conduct a holistic review of the boundary between advice and guidance.