The City regulator rejected almost one in five applications for authorisations last year – up from one in six in 2020.
In the year to 2 December 2021, one in five firms which applied for Financial Conduct Authority (FCA) authorisation were refused, rejected or withdrew their application after discussions with the watchdog. The regulator put this down to applying standards more robustly when authorising firms.
The FCA said that newly authorised financial firms will benefit from additional support following a pilot run by the regulator over the last year.
It said when fully rolled out in 2022, this early oversight, with regular contact from the FCA, will help ensure firms treat their customers fairly during the crucial early years of their development.
The City regulator said that it removed approval to undertake financial services from 176 firms last year, which have not carried on regulatory activity in the last 12 months as part of its ‘use it or lose it’ approach. This is designed to protect consumers who are misled about their level of protection.
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The FCA said it also continued to alert the public to scams, with a record 1,300 warnings issued over the past year and revealed its contact centre prevented £4m being lost to scams in 2021.
Furthermore, the regulator has secured £5m to be paid back to people who invested in companies that were not authorised to undertake financial activity and a further £28.5m was frozen due to FCA action to be paid back to investors, subject to the outcome of legal action.
Throughout last year, the FCA has engaged social media platforms and search engines to help ensure that they comply with laws to protect people from scams and high-risk investments. As a result, Google UK has made changes to its policies to ensure that any financial advertiser has to be authorised by the FCA.
The FCA has also called on the government to include paid-for advertising in the Online Safety Bill and pushed for changes to the regulation of cryptoassets and has said that almost 90 per cent of those firms have been refused or withdrawn their application as a result of FCA action.
“The FCA has protected customers, enhanced the integrity of the UK’s financial system and promoted competition this year, despite the additional challenges of the pandemic,” said Nikhil Rathi, chief executive of the FCA.
“We have reformed the general insurance market, saving consumers £4.2bn over 10 years, led the transition from LIBOR and helped small businesses claim £1.2bn against business interruption insurance cover.
“We are looking forward to using our innovative, adaptive and assertive approach to achieve even more for consumers and the financial market next year.”
Elsewhere, the FCA said it has updated its sandbox to now accept applications on a rolling basis, rather than firms having to wait for application windows as they previously had to.
Last month, Rathi defended the regulator against accusations it is losing focus on fintech and said that it is working on the backlog of delayed authorisations.