Last year, as part of a drive to reduce consumer harm in the wake of the London Capital and Finance scandal, the FCA commenced its "use it or lose it" project. This project aimed to identify and write to those authorised firms that had not utilised its permissions for 12 months or more, inviting them to either voluntarily cancel those permissions or to explain how they intended to use those permissions within the next three months.

The project has now completed its pilot phase, with more than 1,000 firms contacted, resulting in the voluntary removal of permissions of 264 of those firms and variation of the permissions of 47 more. Where firms refused to voluntarily cancel their permissions, the FCA could, where appropriate to do so, apply for those permissions to be removed under the existing cancellations process.

On 19 May 2022, the FCA published a policy statement, explaining that it will now seek to exercise its new powers under the Financial Services Act 2021 to remove firm permissions under a streamlined and shortened process. This will enable the Regulator to start the cancellations process as soon as it considers permissions are not being used (removing the requirement that the permissions must not have been used for 12 months or more), by serving 14 days' notice on a firm. Permissions are able to be removed or varied as soon as one month from notification. This streamlined process is also likely to enable the Regulator to move more quickly, both in response to specific intelligence about firms and in its contact of firms which have not reported any regulated activity.

In instances where our regulated clients are not currently using their Part 4A permissions, we would strongly advise that thought is given as a priority as to whether they have the correct permissions in place, whether they require permissions moving forward and, if so, how they will be able to evidence an intention to perform regulated activities in the near future. Thinking closely about the need to vary or cancel any permissions now will enable firms to be proactive in approaching the Regulator with applications to vary. It is our understanding that, from the date of initial contact, a firm has only two weeks to respond with evidence, so firms may want to carefully consider whether it would be of benefit to take a considered decision now, looking at all available options, rather than having to deliver a time-pressured response.