On 22 October 2024, the United Kingdom’s Financial Conduct Authority (UK FCA “the Authority”) imposed restrictions on Business Agent Limited, preventing the firm from conducting any regulated activities. These actions are based on the concerns over the firm’s handling of client funds and non-compliance with regulatory standards, particularly in relation to its Nextcrowd platform. The restrictions are imposed after the Second Supervisory Notice issued on 10 September 2024 deals with serious failings in the firm’s management of client money, violations of UK ISA regulations, and due diligence, prompting the UK FCA to intervene to protect consumers and maintain financial market integrity.
This notice was the result of ongoing regulatory concerns and followed an earlier First Supervisory Notice issued on 22 July 2024. The UK FCA’s review of Business Agent Limited revealed several significant failings in its operations, prompting the imposition of strict requirements to protect consumers. These included restrictions on the firm’s ability to conduct regulated activities without prior written approval from the Authority, along with obligations to notify relevant stakeholders about these restrictions.
The Second Supervisory Notice was issued after the UK FCA reviewed the firm’s representations, submitted following the First Supervisory Notice, but concluded that the concerns remained unresolved. The firm’s operations posed a continuing risk to consumers, particularly regarding its management of client funds and compliance with United Kingdom’s ISA regulations. As a result, the UK FCA determined that the initial restrictions should remain in place and that additional steps were needed to prevent further harm.
The UK FCA’s review revealed troubling practices at Business Agent Limited. One of the issues was the firm’s unauthorised handling of client money. Despite a regulatory requirement that it must not hold or control client funds, the firm had been receiving and managing these funds without the necessary permissions. This was a clear breach of the United Kingdom’s Client Money Asset Sourcebook (CASS) rules, which are designed to ensure that clients’ funds are properly safeguarded and not exposed to undue risk. The UK FCA also identified issues related to the firm’s compliance with United Kingdom’s Individual Savings Account (ISA) regulations. Business Agent Limited had been receiving United Kingdom’s ISA subscriptions into accounts that were not correctly set up under the relevant regulations which according to UK FCA jeopardised the security of client investments.
In addition to these financial management issues, the UK FCA found that the firm lacked effective systems and controls to manage key operational risks. Business Agent Limited had failed to put in place adequate measures to identify and manage potential conflicts of interest. These conflicts, if unmanaged, could have compromised the firm’s decision-making processes and harmed its clients’ interests. The firm had not conducted adequate due diligence on the investments listed on its Nextcrowd platform, raising concerns about the quality and reliability of the investment opportunities it was offering to clients.
The UK FCA also noted the firm’s failure to provide requested information about individuals associated with the business. This lack of transparency was a breach of the regulatory obligation to deal with the Authority in an open and cooperative manner. There were potential breaches related to the approval of financial promotions, with the firm possibly failing to comply with rules regarding the promotion of non-mass-market investments. These failures to disclose important information and to meet regulatory requirements raised serious concerns about the firm’s overall governance and regulatory compliance.
As a result of these ongoing concerns, the UK FCA imposed restrictions on Business Agent Limited. The firm is prohibited from conducting any regulated activities without the UK Authority’s prior written consent, effectively halting its operations. Additionally, the firm was required to notify its financial service providers and clients about the restrictions, ensuring transparency about the firm’s limitations. The UK FCA also required the firm to safeguard all client money properly and provide weekly updates to the Authority in the form of bank statements, allowing the UK FCA to closely monitor the firm’s financial activities.
The notice also put restriction on Business Agent Limited’s role as an ISA Manager. With this restrictions in place, the firm could no longer act in this capacity, and investors who had ISAs managed by the firm were advised to contact Business Agent Limited directly to address any concerns. Although the restrictions applied primarily to the firm’s platform operations, investors were encouraged to reach out to the issuers of their investments to determine if their assets were impacted by the firm’s regulatory failings.
The breaches identified by the FCA against Business Agent Limited were serious and include violations of provisions such as the United Kingdom’s Client Money Asset Sourcebook (CASS), UK ISA Regulations, and multiple principles of the UK FCA’s Principles for Businesses (PRIN). UK FCA flagged the firm’s failure to manage conflicts of interest, protect client assets, and maintain transparency with the regulator were significant breaches. The firm’s non-compliance with United Kingdom’s SUP 16.31.5R(1)(b), which requires timely notification of financial promotions was also duly covered in the supervisory notices.
The UK FCA’s action against Business Agent Limited was due to the firm’s failure to meet the Threshold Conditions outlined in the United Kingdom’s Financial Services and Markets Act 2000. The firm was deemed to be failing, or likely to fail, to meet both the Suitability and Business Model Threshold Conditions. These regulatory standards ensures that a firm operates in a manner that protects consumers and the broader financial market. The firm’s failure to manage client funds properly, its non-compliance with ISA rules, and its inability to conduct due diligence or manage conflicts of interest indicated a business model that posed a risk to its clients.
(Source: https://www.fca.org.uk/news/news-stories/fca-imposes-restrictions-business-agent-limited, https://www.fca.org.uk/publication/supervisory-notices/second-supervisory-notice-business-agent-limited-2024.pdf)
