What happens if you do not follow FCA regulations

 

 

As a firm, you may be wondering what the implications could be if you do not follow Financial Conduct Authority regulations. In terms of what can happen, the action can vary depending on your breach of compliance and can result in fines, excommunication and court action. Here are some of the outcomes that can happen if you are not FCA compliant.

 

Enforcement by the FCA

 

The FCA’s Enforcement division works in collaboration with the authorization, supervision and strategy and competition sections, as well as law enforcement and other regulators. This means that by not following FCA regulations, you can potentially be under investigation very quickly, hence the importance to be compliant from day one and at all times.

 

What sort of action can they take?

 

There are a number of ways in which the FCA can penalize you for not following regulations. These may include any of the following:

 

  • Issuing fines against companies (as well as individuals too) who breach FCA rules or otherwise commit market abuse. The size of these fines are determined by the FCA and can range in the millions.
  • Penalizing firms who breach competition laws by issuing fines.
  • Removing a firm’s authorization status due to a breach of conduct, which can have huge implications for the company’s future.
  • Preventing individuals within a company from being able to carry on conducting regulated activities as a result of their non-compliance.
  • Publishing details online of when disciplinary action is about to start, as well as the details of the final decision, final notices, as well as any warnings, were previously given. This public announcement, if it is a decision made by the FCA, could be harmful to your firm’s reputation, as this information will be public for all to see.
  • Issuing warnings about unauthorized firms and their activities and encouraging web hosts to deactivate their websites. This could have particularly bad consequences for promoting and marketing your company if this decision is made.
  • The FCA could also decide to apply to the courts for restitution orders, insolvency orders or injunctions against your business.

 

Is it possible for the FCA to take action if my company is unauthorized?

 

Yes, if your business is not currently authorized, it is still very possible for the FCA to take action against you. Not being authorized and trading as normal is a very common reason for enforcement. To carry out regulated services as a provider or intermediary in the UK, you must have full permissions and be authorized as a primary function or appointed representative. However, not all financial services are regulated including cryptocurrencies, invoice finance and non-status mortgages – see the full list of exemptions here.

 

What are enforcement notices?

 

The FCA could provide you with enforcement notices as a result of being non-compliant. As previously mentioned, these are published in order to inform the public, to show that their decisions are transparent in nature, as well as maximize the deterrent effect, as no company wants enforcement notices published online for all to see. There are different enforcement notices that could be used. These include the following:

 

  • Warning notices: the details of these may be published online, and they state when the FCA is intending to take action against your company
  • Decision notices may then be issued when the course of action has been decided upon
  • Final notices are given by the FCA when they have decided to take action

 

Trading companies have the option to take compliance into their own hands and follow the guidelines required step-by-step. This includes becoming an FCA regulated firm and trading thereafter. If you do not have any staff in-house with compliance experience or have someone dedicated to this role, there is the possibility of hiring an outside compliance consultants to assist. This can ensure that you minimize any damage to your organization and can continue to trade in the most compliant way possible.

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