FCA calls for MiFID II applications for permissions

Jun 19th '17

MiFID II: applications for permissions needed now

MiFID II applies from 3 January 2018, and will deliver some important changes to financial services regulation in the UK.

Firms who need to change their regulatory permissions as a result of MiFID II should submit a complete application for authorisation or a variation of permission now, to ensure that we can we determine it before MiFID II takes effect. The Financial Conduct Authority (FCA) expect firms to be busy considering what impact MiFID II will have on their business and to act accordingly.

To be sure that the FCA can determine an application in time for 3 January 2018, it needs to be complete by 3 July 2017. Most applications are not complete when they are submitted. Firms who have not already done so should therefore submit applications as a matter of urgency to help them identify as soon as possible what, if any, further information is needed to complete the application. The FCA cannot guarantee that any application which is only complete after 3 July 2017 will be determined by 3 January 2018.

There are consequences for firms who undertake regulated activities without the required permissions under the Financial Services and Markets Act 2000 (FSMA). These consequences are explained in further detail below.

If your firm is affected by MiFID II, the regulators application and notification user guide will help you understand the steps you may need to take. You should direct any questions you may have about the impact of this guide on your firm’s business to the FCA Contact Centre on 0300 500 0597 from the UK, or +44 207 066 1000 from abroad.

Consequences of acting without authorisation to do so

Firms that carry on MiFiD II activities without the necessary permissions may face civil, regulatory and/or criminal consequences.

Unauthorised firms

If an individual or firm carries out regulated activities in the UK by way of business without being authorised or exempt, it does so in breach of section 19 of the FSMA. Breach of section 19 of FSMA is a criminal offence.

In addition contracts entered into or which others enter into through the unauthorised person in the course of carrying on those regulated activities risk being unenforceable (absent a court order to the contrary).  The individual or firm also risk breaching the requirements in relation to financial promotions under section 21 of FSMA, which is also a criminal offence, and can have consequences in relation to enforceability of agreements resulting from unlawful communications.

FCA has power under Part XXV FSMA to apply to Court for injunctions and restitution orders against people who contravene sections 19 and 21 of FSMA.

Authorised firms acting without the correct permissions

An authorised firm that undertakes regulated activities without the appropriate permissions to do so will contravene section 20 of FSMA. In such circumstances there are a number of regulatory tools that may then be available to them, including:

  • disciplinary sanctions: including public censure, financial penalties or the suspension or restriction of their permissions under Part 14 of FSMA
  • OIREQ (Own Initiative Requirement) and OIVOP (Own Initiative Variation of Permission) powers under Part 4A
  • powers of injunction and restitution under Part XXV of FSMA

The FCA may also take action where a firm breaches our rules (such as SYSC 6.1.1R in relation to systems and controls).

Where there is misconduct by individuals (e.g. those responsible for the firm’s compliance with regulatory requirements) they may also take action against them.

How to report unauthorised business

The FCA receive over 8,500 reports of potential unauthorised business in the UK each year. The majority of these reports come from consumers and firms. Firms conducting unauthorised business can be reported to them by calling our Contact Centre on 0300 500 0597 or using or by using our online reporting form.

Source: FCA