On 9 September 2021, the FCA published Consultation Paper 21/28 ‘New cancellation and variation power: Changes to the Handbook and Enforcement Guide’ (CP21/28).

The Financial Services Act 2021 inserted a new Schedule 6A into the Financial Services and Markets Act 2000 (FSMA). This schedule set out a new power allowing the FCA to more quickly and efficiently:

• Vary or cancel the statutory permissions to conduct FCA-regulated activities of firms it has authorised under Part 4A of FSMA, as well as the permissions of firms deemed to be so authorised, where those firms (i) appear to the FCA to be carrying on no FCA-regulated activities for which they have permission, and (ii) have not responded as the FCA has directed to its notices warning of the risk of such action.
• Reflect such variations and cancellations on the Register.

In January 2021, when warning of its ability to use its new power the FCA asked firms to review their permissions, to ensure they are up to date and removed if not needed. The FCA also pointed out, when making that request, the risk of firms breaching FSMA if they fail to take those steps. In the June 2021 Quarterly Consultation Paper the FCA made clear that it intends to use the new power, where the conditions set by Schedule 6A are satisfied, in its ‘use it or lose it’ exercise.

In CP21/28 the FCA sets out proposed changes to the Handbook and Enforcement Guide in light of its new powers under Schedule 6A of the FSMA. These are set out in full in a draft instrument appended to CP21/28. In particular, the FCA proposes to describe the new power in the Supervision Manual (SUP), as well as the process that Schedule 6A requires it to follow and set out guidance on its approach to it. The FCA intends to describe circumstances in which it may consider that a firm is not carrying on any FCA-regulated activities, as well as factors it may take into account when considering an application for annulment. The FCA also proposes to signpost in SUP its potential use of the new power during an investigation or when it is considering an investigation. The FCA also explains that it is more likely to use the new power to cancel, rather than vary, firms’ permissions.

The deadline for comments on CP21/28 is 29 October 2021.