Unauthorised business and the approach to enforcement—civil proceedings
Produced in partnership with Sarah Clarke of 3 Serjeants’ Inn
Unauthorised business and the approach to enforcement—civil proceedings

The following Financial Services guidance note Produced in partnership with Sarah Clarke of 3 Serjeants’ Inn provides comprehensive and up to date legal information covering:

  • Unauthorised business and the approach to enforcement—civil proceedings
  • The general prohibition
  • The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
  • Civil Proceedings in respect of unauthorised business
  • Injunctions and orders
  • Examples of regulator activity
  • Petitions for administration orders or compulsory winding up orders

The Financial Conduct Authority (FCA), the Bank of England (BoE) (including the Prudential Regulation Authority (PRA)) (the regulators) may take action against persons and businesses which operate without the correct authorisations. This Practice Note summarises the regulators’ approach to enforcement in relation to unauthorised business.

The general prohibition

The general prohibition is a concept at the heart of the UK regulatory system. This means that persons providing financial services must have the necessary authorisations and permissions in place in order to do so legitimately.

Since 2013, with the creation of a UK regulatory system to include the Bank of England (eg for recognised clearing houses), the PRA (which is part of fhe BoE), and the FCA, as well as the firms are required to consider whether authorisation is needed by a number of bodies . There is in theory much scope for firms to unwittingly contravene requirements to be authorised and not have the correct Part 4A permissions in place. However, the reality is that much of the enforcement carried out by the regulators covers firms and persons who probably never had an intention to be authorised, eg boiler rooms, share scams, deposit frauds, and ponzi schemes (all frauds of various guises). For more information see: What are regulated activities?, Regulated activities—specified activities and investments—overview, PRA-regulated activities and the scope of PRA regulation, Financial Conduct Authority—preparing for authorisation, Prudential Regulation Authority—preparing for authorisation and Financial Conduct Authority—objectives and principles.

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)

Given its strategic objective (ensuring that the relevant markets function well) and the operational objective of consumer protection (see FSMA