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MM leader: The tough battle against unauthorised firms

A quick browse through the unauthorised firm warnings on the FCA’s website shows the scale of the problem the regulator is trying to deal with.

The warnings range from firms cloning genuine financial services companies to pensions-unlocking, carbon-credit trading and “deposit free” homes.

They are categorised under the “unauthorised firms and individuals to avoid” section of the FCA website and the 142 warnings published since the FCA started up in April is a huge increase on the FSA’s 10 warnings in 2012/13.

However, regulatory experts have highlighted unauthorised business as an area of growing concern. Is there more the FCA or other regulatory bodies should be doing to stop such firms?

Money Marketing research of the last 100 unauthorised firm warnings finds that 74 of the firms promoted their business online through a company website and in nearly half, 31, of these cases the websites are still active.

Inclusion in the FCA’s list makes it more likely that internet searches will pick up the regulator’s warning but this is not always the case.

The FCA says it uses both civil and criminal powers to shut down certain firms but there appears a gap between what the FCA is currently able to achieve and stopping the potential for vulnerable consumers to be taken advantage of.

The regulator also encourages consumers and advisers to report any suspicious looking websites to the regulator through its helpline.

The Advertising Standards Agency has the power to name and shame firms which provide misleading advertising but it has no powers to shut down websites and only limited powers to force other sanctions.

It can pass matters on it the Office of Fair Trading and can also issue sector-wide rulings, as it did earlier this year against letting agents.

Judging by the number of firms appearing on internet searches in recent months such a general ruling should be seriously considered against pension unlocking firms.

Clamping down on unauthorised firms is not an easy task. Many are based offshore and nimble companies can quickly change their name and website. There is also the time and costs associated with bringing successful proceedings against firms.

Regulatory bodies such as the FCA, The Pensions Regulator and the OFT, will need to continue to work hard together to eliminate the problem of unauthorised firms.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Perhaps they might not have quite such a struggle if they stopped trying to micromanage those who have passed through the ring of fire and concentrated their regulatory efforts on the basics. And non-authorised firms I would have thought are the most basic target for regulation.

  2. On a related note, should regulated firms be the ones to pay for dealing with unregulated firms? Surely the taxpayer should be funding this rapidly growing element of what the FCA does, rather than firms which are complying with the law?

  3. Absolutely spot on Martin

  4. Well said Felix (and indeed Mr Bamford).

    The idea that its a ‘tough fight’ is something that I frankly feel incredulous about. They have vast resources from which they can harass people for not getting page 99 of their GABRIEL report right or launch thematic reviews of how many clients were wearing hats when received client agreements. Yet, they’ve assigned something like 4 junior staff and their dog to what is termed ‘perimeter enforcement’.

    It’s not as if these unauthorised firms are using carefully selected loopholes in most cases. Most of them are clearly just acting unlawfully.

    To repeat an old adage, its time for the FCA to “go catch some real criminals”.

  5. The bigger this problem becomes, the more resources the FSA will throw at trying to tackle it, for which all the legally operating firms will be forced to stump up, ad nauseam. Surely, this is an international criminal problem, not a domestic regulatory one?

    And what does the growing number of victims of these fraudulent schemes tell us about public awareness of and faith in the FSA? After all the billions of pounds of OPM that the FSA and its predecessors have ravenously devoured over the past 25 years, how can people, apparently in droves, still be getting suckered into and ripped off by these scams?

    If the FCA absolutely has to be involved (though I don’t see why it should), shouldn’t its first step be to embark on a robust public warning initiative? What about a series of short, punchy TV broadcasts, highlighting to consumers that the very first thing they should do before even contemplating engaging with any firm trying to persuade them to invest money is to CHECK THAT THEY’RE AUTHORISED AND REGULATED BY THE FSA. Unless, before doing anything else, you establish such a fundamental criterion, your money and your wealth could be at serious risk. It’s a pretty basic message.

    Saints (not Sants) preserve us ~ how much simpler could it be?

  6. I agree with Martin, Harry & MIB. WE pay the FCA and in any other business we expect those we pay to do what we ask. Even the government do that or get voted out. The FCA however do what the treasury want with no logic. Chasing unregulated should be paid by the taxpayer and NOT the regulated,but needs to be done by the FCA. Give us back the FCA fines confiscated by the treasury and use it to pay for policing unregulated.
    NO taxation without representation should again be the call of Independence.

  7. Whilst I agree that there’s something wrong with the FCA spending levy-payers money policing non-levy payers, and that the bill ought to be picked up by the Treasury, the reality is that FCA could easily resource this with no extra cost to levy payers.

    All they have to do is can the bozos they employ supervising or harassing small firms, or the overpaid call centre workers in Tower Hamlets. Some of these could then be re-employed in perimeter enforcement.

  8. @Phil C

    In my mind, “no taxation without representation” has a different meaning. It means that IFAs should be regulated through their own professional body/ies with lay representation – not by professional bureaucrats – and should operate its own ombudsman/dispute resolution service.

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