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Avoiding capture: Research shows FCA must do more to tackle unauthorised firms


The FCA is failing to materially crack down on unauthorised firms as Money Marketing research suggests unregulated investments continue to be marketed long after the regulator has warned against them.

Money Marketing analysis reveals as of 23 May, the FCA had published 153 consumer warnings on its website about unauthorised firms, including clone firms used by fraudsters.

Of the 153 firms, 110 have a website address and 49 still have an active homepage. As well as website details, the warnings list telephone numbers and email addresses for the unauthorised firms.

This investigation follows res-earch undertaken by Money Marketing in 2015 and 2013 in which a sample of the 100 most recently published warnings was analysed.

In March 2015, 59 per cent of the 83 firms that marketed their services online had a live website. In 2013, 74 firms used online marketing and 31 of those companies had active websites.

Looking legitimate

The unauthorised firm warnings posted on the FCA website so far this year relate to loan offers, investments, insurance broking and asset management services.

Some of the firms are clones of European Economic Area firms and many of them have legitimate sounding names that could dupe unsuspecting consumers.

Personal Finance Society chief executive Keith Richards says: “The problem with these scammers is they look legitimate. They look like authorised firms and they have credible websites with links to what unsuspecting consumers would expect were the right places, often including the regulator.”


Richards notes a trend towards scammers promoting good investment performance, something that should be a red flag for consumers because professional advisers do not do this.

He explains: “In low interest markets it is very easy for people to get duped into schemes that promise to guarantee their investment and give them returns of three or four times the current base rate. It is mainly investment gain people are looking for – getting their money to work harder for them.”

However, unauthorised firms continue to be mistaken for professional advisers which exacerbates negative consumer perceptions of the sector.

Richards says: “Even after the event, the consumer will feel they dealt with an advice firm that ripped them off. It is important for us to work with the regulator and the Government because it does have consequences of damaging the reputation of the sector.”

The limited impact of warnings

The industry is unanimous the FCA could do more to shut down unauthorised firms but recognises there are barriers to tighter oversight, such as resourcing and consumer engagement.

It is a criminal offence to carry out regulated activities if a firm is not authorised or is exempt and unauthorised firms that have received a warning could eventually be criminally prosecuted, resulting in a fine or a maximum prison sentence of two years.

The Compliance Consortium associate director Chris Martin explains the FCA’s enforcement division looks to prosecute unauthorised individuals and firms.

He says: “The FCA also works with international regulators to share intelligence where possible and where firms or individuals have crossed jurisdictions or operated separate known unauthorised schemes in other countries.

“The FCA’s financial crime and intelligence division is also proactively looking to identify any  unauthorised individuals or activity where they become known to them through sources and engagement with the police and other forces to take joint action where criminal activity has also taken place.”


Independent consultant Richard Hobbs says it is important to establish if the unauthorised firm is  engaging with the regulator to obtain authorisation.

Hobbs explains: “You have got to be sure the website that is still up is undertaking regulated activity and that the people running the website are not authorised – they could have been authorised in the meantime.”

He adds: “Then you have got to be sure their reaction to the warning notice has not been to become an introducer for somebody else so that [another person] is responsible for their compliance – if that is the case, then the website should state this. There are logical possibilities as to why a website is still up.”

However, Hobbs considers if a warning has been issued, follow-up action by the regulator should be expected and the number of live websites should fall to zero.

Resourcing was highlighted as a constraint preventing the regulator doing more to shut down unauthorised firms.

Martin explains: “The FCA has very limited resources and relies on input from firms and individuals to pass on information. They do their own proactive work, but the best intelligence comes from whistleblowing.

“The FCA has worked hard to get this message out to firms and individuals, and this has improved over the last five years but more engagement from the public and market would aid this.”

On each warning published, the FCA provides details of how to report an unauthorised firm, including listing the telephone number for its consumer helpline and telling consumers what information they should provide to help the regulator identify the unauthorised business such as the name of the firm, contact details and the firm’s reference number.


While the regulator has these reactive measures in place, Martin concedes it would be very difficult to stop firms coming to market in the first place.

He says: “Any individual can start operating without authorisation and it requires someone or something to flag to the regulator that there is an issue, often by someone whistleblowing or unfortunately when it is too late and detriment has occurred.”

Martin highlights consumer education as the best preventative measure in letting people know they can search the financial services register for unauthorised firms, a measure introduced by the FCA in September 2015.

However, boosting consumer engagement around unauthorised firms is a tall order, say compliance experts.

Compliance monitoring firm Recordsure chief executive Joanne Smith warns campaigns often fail to reach consumers.

She says: “The use of social media and other consumer-facing communication channels, such as the Scam Smart campaign, as well as the regulator’s own website, have been positive but still reaches a very limited audience.”

4 Pump Court barrister Peter Hamilton says the regulator publishing warnings on its own website only serves to “help their own conscience”.

He says: “If the FCA thinks an unauthorised firm is something the public needs to be warned about and they put a warning on their website where no member of the public is likely to look, then it probably follows the FCA should be doing more.

“The problem with the FCA doing more is it costs more and that comes out of the purse of those that are authorised.”


Hamilton suggests the regulator could partner with a news outlet to spread warnings further.

He explains: “The FCA may enter into a deal with some widely read journal or a widely read website, such as the BBC, and stick them on that and get the respective journalists in the main newspapers to either draw people’s attention to the place to look or to publish them in the newspapers. I don’t suppose that would cost too much.”

Smith suggests authorised firms could make their clients and customers aware of the presence of  unauthorised businesses in the market and where they can turn if they are unsure about the company they are dealing with.

Government must step in

The Government is also being urged to take a more active role, given that sweeping reforms, such as pension freedom, have the potential to make consumers more susceptible to scams as unscrupulous firms exploit confusion around the changes.

Richards explains: “The Government has also been raising concerns about the increasing number of scams and the vulnerability of the public since the introduction of pension freedom. I suspect the regulator will have the full support of the Government on whatever changes need to be introduced so they can take more immediate action to close these scammers and fraudsters down.”

Richards and Smith also suggested the Government could play a grea-ter role in consumer awareness on unauthorised firms.

Richards says: “The Government needs to be doing more to promote  anti-scam and fraud activity. There needs to be a more proactive campaign to bring the issues to the attention of the public, for example, case studies where people have lost their life savings having been duped into some fraudulent investment scheme.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. All of this stuff is so depressing as the regulator continues to up the ante with regards to the micro regulation of the sector that causes them the least problems.

    It seems so simple to me, especially in line with their (FCA) statutory requirement to improve the confidence of the public in the Financial Services Sector and to protect the consumer generally.

    Instead of just using a great big stick to bash those that pay them their wages – how about this for a novel strategy;

    1. Do something positive and uplifting for a change. Not the typical naming and shaming and monster fine strategy that has not led to an increase in confidence for the consumer, but how about – Advertise (big!) that if a consumer want’s to think about advice regarding investments they should only go to an ‘Authorised’ adviser. If they are not Authorised & Regulated by the FCA there is ‘no regulatory’ protection for them. Inform the investing public to check that the person or firm they are dealing with is or are actually Regulated by the FCA and can prove it on the FCA Register.

    2. Force all of us Regulated Adviser types to ‘hard disclose’ that any advice, products or services that are not Regulated by the FCA, that we end up recommending to consumers, such as UCIS and the like, will not be protected by the Regulator and the FSCS or FOS.

    3. This would build confidence and awareness in the Regulator and the Regulated Advice sector in general and the consumer would be more aware of the risks of not using a Regulated Adviser for investments and investment advice.

    4. We, the regulated community, could then at least see some benefit to us for the grief that we are put through and the money we have no choice but to pay to remain regulated, whilst other non regulated firms can peddle their wears in what it seems complete disdain of the rules.

    5. Consumers would be better protected and aware of Regulation and we would feel (if only slightly) a warm and fuzzy benefit, of actually being regulated.

    Hang on, a squadron of porkers are approaching at 3 O’clock.

  2. Julian Stevens 26th May 2016 at 11:57 am

    It’s much easier and more fun for the FCA to harry the life out of authorised advisers.

    A properly empowered Independent Parliamentary Regulatory Oversight Committee would be able to instruct the FSA to give authorised advisers a bit of relief and concentrate its resources on going after unauthorised ones. They’re where the real dangers to the public lie.

  3. The FCA must take strong action against these rouges and also against authorised advisers who phoenix after getting clients involved in rip off scams.

  4. Julian Stevens 27th May 2016 at 10:23 am

    John Reilly ~ Good post, though one of the major problems (for us) with the FSCS is that it takes only ONE regulated adviser to have flogged some junk investment that’s subsequently gone down the pan for the costs of compensating ALL investors to be imposed on the regulated adviser community. I just don’t understand why tackling this manifest injustice isn’t a cornerstone of APFA’s campaign for reform.

  5. John Reilly

    Whilst this is a pleasing thought, I think the process is somewhat more straightforward. Unauthorised advice is illegal. Therefore having this as a problem at all rather points to a lack in the regulatory function.

    As you so pithily point out, it seems they are more concerned with the micromanagement instead of concentrating on the dinosaur in the room. One might be excused for concluding that the legions employed at Canary Wharf prefer taking the easiest course to show that they are hard at work regulating. (Or could that be overregulating as we are witnessing with the suitability reviews).

  6. Julian Stevens 31st May 2016 at 5:16 pm

    Not only does the FCA “have more to do” with regard to unauthorised firms, it has at least as much more to do to tackle the practice of phoenixing. In fact, thinking about it, does the FCA do ANYTHING well?

  7. Julian

    I think a little sympathy for the regulator is warranted. Of course they don’t do anything perfectly. How could they when hog tied to the Government.

    The current regulator is the love child of the last. An invention of Machiavellian Brown. If the regulator boobed the government could say ” It ain’t us Guv – they are totally independent”. On the other hand when they manage to something right the government steps in to take the credit. Literally sometimes, as when the filch the fines to pay the troops.

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