FCA stops applications from 343 firms and individuals in 2020 due to potential consumer harm
The UK Financial Conduct Authority (FCA) today published a summary of its work to tackle consumer harm in the investment market, The summary covers the period between 1 January and 31 October 2020.
The FCA explains that some firms are not ready to meet the minimum standards for authorisation. In these circumstances, the regulatory usually recommends the refusal of a firm’s or individual’s application or a firm will withdraw rather than face a refusal case.
In the first 10 months of 2020, a total of 3,885 firms and individuals applied for authorisation in the consumer investments market. Of these, 4 firms had their application rejected, and a further 339 firms and individuals withdrew because they could not demonstrate that they could meet the standards required. This represents almost 10% of all applications.
The FCA adds that it will revoke authorisation if a firm no longer meets minimum standards. There are various circumstances that could lead to the cancellation of a firm’s authorisation. For example, a firm that can no longer fulfil its basic regulatory obligations, such as paying fees or submitting returns.
Between 1 January and 31 October, 131 firms had their authorisation revoked across all FCA regulated firms because of breaches of Threshold Conditions.
The regulator says that it has approximately 30 live investigations or proceedings relating to the conduct of regulated firms and individuals where consumers have invested in potential scams or higher risk investments. These are ‘parent’ investigations which often involve multiple subjects (firms and individuals), and so the total number of firms and individuals under investigation is significantly higher.
In terms of complaints, the FCA reports that it received almost 20,000 consumer enquiries about potential scams in 2020, with investment scams accounting for 57% of all these enquiries. This is 23% higher than enquiries in the whole of 2019.
The regulator also saw a 58% increase in enquiries about FCA impersonation scams (where fraudsters contact people claiming to be the FCA), a 69% increase in cryptocurrency scams and a 20% increase in recovery room scams (where fraudsters approach investors who have been scammed or had failed investments, offering to help them get their money back for an upfront fee).
While the most complained about products in pensions and investments are those that tend to be held by more consumers (such as workplace and non-workplace pensions, investment ISAs and platforms), when adjusting for the number of products in the market, high risk investment products tend to appear at the top of the list, at significantly higher than 2.7 or 2.8 complaints per 1,000 products.