FCA denies 12 advice firms authorisation following phoenixing suspicions

Sophie King reports

The Financial Conduct Authority (FCA) has clamped down on consumer investment harm and prevented 12 firms from gaining authorisation following suspicion of phoenixing in the first 10 months of 2020.

In a consumer investment report issued on Monday morning (18 January), the financial watchdog highlighted several ways in which it is working to protect consumers from investment harm by disrupting potentially harmful firms and activities.

It outlined action taken by the FCA throughout the first 10 months in 2020, where many consumers were under pressure to tackle their finances because of coronavirus restrictions.

Throughout this period, the regulator stopped applications for authorisation from 343 financial services firms and individual firms, where almost one in 10 applications showed potential for consumer harm and opened more than 1,500 supervisory cases involving scams of higher risk investments.

The report found that 12 financial advice firms were prevented from gaining authorisation where phoenixing was suspected. The FCA said it carries out “robust checks” to establish whether a firm’s exit is motivated by a desire to avoid liabilities and, where it has concerns, takes appropriate action.

In addition, 131 firms had their authorisation revoked across all FCA regulated firms due to breaches of threshold conditions.

Elsewhere, the FCA received more than 24,000 reports of unauthorised activity and published more than 1,000 consumer alerts, an 82% increase from the previous year.

The regulator also took action against firms found to have cause consumer harm. It pursued 47 enforcement investigations against unauthorised businesses in 2020, securing nearly £6m to be returned to consumers and obtaining court orders ordering that more than £14m be returned to consumers.

‘Use it or lose it’

FCA executive director, consumers and competition Sheldon Mills said: “Protecting consumers and ensuring they have confidence in the suitability of advice they receive is a key priority for the FCA and today’s report highlights some of the work we are undertaking to achieve this.

“Incorrect or out of date permissions increase the risk of harm to consumers as they can mislead consumers about the level of protection offered or give credibility to unregulated activities. This is why we’re today calling on firms to review their permissions and ensure they reflect current business models.

“We will take action where we consider out of date permissions may cause harm to consumers.  The message is clear, use it or lose it.”