By Huw Jones
LONDON (Reuters) – Financial scams rocketed as the pandemic unfolded last year, with one in 10 applications for licences rejected or forced to withdraw, Britain’s Financial Conduct Authority said on Monday.
The FCA said that to reduce the risk of harm, it was asking financial investment firms to either use their licences once granted, or risk losing them.
Firms should also tell the watchdog if their business model was changing given that outdated or incorrect permissions can mislead consumers about the level of protection offered or give credibility to unregulated activities, it said.
“This is why we’re today calling on firms to review their permissions and ensure they reflect current business models,” said Sheldon Mills, the FCA’s executive director for consumers and competition.
“We will take action where we consider out of date permissions may cause harm to consumers.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.”
The FCA said that in January to October, it received over 24,000 reports of unauthorised activity and published over 1,000 consumer alerts, an 82% rise on the previous year.
More consumers are vulnerable to scams during the pandemic because of heightened financial pressures.
It stopped applications for authorisation from 343 financial services firms and individuals, where the potential for consumer harm was identified.
The market for transferring pension pots from a defined benefit scheme is particularly susceptible to consumer harm, with intervention by the watchdog stopping 130 firms from providing advice.
The FCA said that most of the consumer investment market was serving retail investors properly, with the most serious harms seen in unregulated areas and online, and many of them based overseas.
Parliament is approving a new financial services law that will give the FCA powers to close down firms much faster, within about six weeks, if it thinks they are not carrying on a regulated activity.
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