FCA Update on Trading Names for FCA Regulated Firms
An important update that was issued in October 2022 from the FCA on Trading names can be used by FCA Regulated Firms.
The extract below is from the FCA website.
FCA Publishes a reminder of how FCA Regulated Firms can use Trading Names protecting the consumer under Consumer Duty and the importance of it being distinct from a Registered Company.
Trading names
First published: 21/10/2022 Last updated: 21/10/2022 Trading names | FCA
A firm can register a trading name that is different to its company name. We explain what firms should and shouldn’t do.
Your firm can add its own trading names to the Financial Services Register. The Register displays firms’ names so that anyone is able to check their details. You should only add genuine trading names that your firm uses.
Firms can include sensitive words in their trading name. However, using certain sensitive financial services terms may be misleading depending on a firm’s business. You must seek a view from the FCA before trading under or registering a business name containing sensitive words. Find out more on sensitive business names.
Regulatory breaches
Registering a trading name with us has no legal effect. Adding a third party as a trading name does not change that person’s regulated status and does not mean that unauthorised person can carry out regulated activities. If that person carries on regulated activity without being authorised or exempt, such as an appointed representative, it’s likely they’re carrying out unlawful unauthorised business. Trading names are not an alternative to being appointed as an appointed representative.
It is a criminal offence for a person who isn’t authorised or exempt to carry on regulated activity in the UK – with a potential penalty of 2 years’ imprisonment, a fine or both. The authorised person that registered the trading name may also be breaking FCA rules as inappropriate registration of trading names could mislead consumers with the risk of causing harm. Registering a trading name is not an alternative to becoming authorised or appointed as an appointed representative.
FCA action
We supervise how trading names are used. If we find firms aren’t following our rules, we will act. This can include:
- fines
- removing trading names from the Register
- securing compensation for consumers
- stopping firms from trading or at least unless we provide prior written consent
Consumer harm
Where a trading name is used in communications with customers, it should be clear, fair and not misleading.
A trading name could mislead if it suggests that:
- The firm is carrying out regulated activities which it doesn’t have permission for.
- That consumers can access the Financial Ombudsman Service or Financial Services Compensation Scheme when they cannot.
- The firm is, or is associated with, another unconnected firm.
If your firm is carrying out unregulated activities under a trading name, you must ensure that all relevant consumer communications clearly highlight which activities are regulated and which are not. If firms do not do this, they could be breaking our rules. Not being clear in this way may mean consumers are unsure on their ability to access the Financial Ombudsman Service or Financial Services Compensation Scheme.
Firms should also consider their requirements under the Consumer Duty before registering a trading name. This includes ensuring they meet our ‘consumer understanding’ outcome, that all communications should support and enable consumers to make informed decisions about financial products and services.
Adding your trading names to the FS Register helps consumers check they’re dealing with an authorised firm, however having multiple trading names can be difficult for consumers to follow. Consider whether having large numbers of trading names could cause consumer confusion and affect your ability to communicate with customers in clear, fair and not misleading way.
