24Nov

The FCA has removed the permissions of a firm that was only authorised for credit broking after it appeared to conduct investment activities.

The Financial Conduct Authority has issued a First Supervisory Notice to a London-based firm, informing the company that the regulator has removed its permission to carry out all regulated activities. The principal reason for this action is that the FCA believes the firm has been conducting activities other than those for which it has authorisation.

The firm has been authorised to carry out credit broking activities – as a secondary activity alongside its core business of property development – but the Notice says that:

The Firm appears to have been engaging in investment-related activities and thus to have been acting outside the scope of its Part 4A permissions. The Firm’s business activities appear to be very different to those of a credit broker.

Regarding the firm’s alleged investment activity, the FCA also says that:

  • The firm’s communications about investments “contain numerous misleading statements which appear designed to give false comfort to investors about the level of protection their investments would receive”. These include statements about levels of protection offered by the Financial Services Compensation Scheme
  • Some customers have invested significant sums with the firm
  • The firm appears to have links to another firm which has previously been disciplined by the regulator for similar reasons

Other areas of concern identified by the FCA include:

  • The information on the firm’s website about the individual who is authorised as a Senior Manager contradicts information previously provided by the firm to the FCA about this person. The contradictions relate to the university he attended, his academic qualifications and his previous employment
  • The firm appears to have failed to keep the FCA informed regarding its correct, up-to-date contact information. The regulator says that anything it sends by post is returned marked Return To Sender, while the phone line does not appear to be connected

The firm contacted the FCA to deny the principal allegation, i.e., that it was conducting investment activity without permission. However, when the FCA tried to contact the firm to discuss this, it failed to respond to invitations to meet. This only heightened the regulator’s concerns, as it believes that this constitutes a breach of FCA Principle 11, which requires firms to be open and co-operative with regulators.

The FCA has also issued a Consumer Warning, alongside the Notice, alerting any customers who may have invested with the firm to the issues identified.

The firm is still entitled to make written and oral representations to the FCA regarding this matter, until November 29. It is also entitled to refer the matter to the Tribunal.

It is vital that firms secure FCA approval for all regulated activities that they wish to carry out. If you are a new applicant firm unsure of what permissions you might need, or an existing firm that is unclear about exactly what your FCA permissions allow you to do, then call Scott Robert’s experts for advice on 0161 914 5727.