July 6, 2020 by Clare Curtis
Do I need to be authorized by the UK Financial Conduct Authority?
You’ll have to apply to the UK Financial Conduct Authority (“FCA”) (or, if you’re dual-regulated, to the PRA) for authorization should you wish to undertake a regulated activity in or from the UK. This process can take up to 6 months if your application is complete but can take much longer if you are not prepared.
Before submitting an application you must determine if you are required to be regulated and if you do by whom. Those who are solo regulated by the FCA fit in to these broad categories:
- Consumer credit activities
- Investment Firms
- Benchmark-related regulated activities
- Payment services and e-money firms
- Innovative firms
Banks, credit unions and insurance firms are regulated by both FCA and the Prudential Regulation Authority (PRA). The PRA is the single point of contact for the application process for these firms. Below we will focus on the FCA application process.
Remember it is your responsibility to establish whether your firm’s proposed business requires you to apply for authorisation to carry on regulated activities. If you are in doubt you should seek expert advice.
Preparing your application
You will need to complete all the required forms relevant to your business type. and provide a regulatory business plan that covers all key areas of your business. Whilst there is no template for a regulatory business plan the following is a guide to the type of headings that should be included:
Background: State the aims and objectives of your firm and why you’re applying for this type of authorisation. If your firm is part of a wider group, explain where it fits in with the group strategy.
Business to be undertaken: Explain where your firm will fit within the market and how your products and services compare to competitors. This should include the types of business your firm intends to be involved in (including, for example, a customer profile) and how your business will be distributed. As well as, three years’ worth of financial projections that explain how you will maintain your minimum capital requirements.
Governance: Provide an overview of your firm’s governance arrangements, including Board composition and any Board sub-committees.
Staff: Include an organisation chart that shows your key staff and roles, including all controllers and close links, what business they conduct and whether they are regulated.
Outsourcing: Detail any outsourcing arrangements and how this will be overseen.
Systems and controls / Risk Management: Consider how your firm will identify and manage conduct risks. Provide an overview of your firm’s financial crime controls, anti-money laundering procedures and due diligence processes.
Information Technology: Include a completed IT self-assessment questionnaire.
Submitting your application
When submitting an application to the FCA you must ensure you can demonstrate to the regulator that your systems and controls will meet the standards of the FCA from day one and that the firm has considered its ongoing requirements. Your application must be complete and to a high standard as poor applications reflect badly on the firm and ultimately will lead to delays and a question over how prepared the firm is for becoming regulated. All applications will need to be accompanied by supporting documentation which is customized to the applicants business and the specific regulations which will be relevant from day one.
The FCA will want to ensure that you are ready to undertake business upon authorization and will be keen to see that a firm has been proactive before submitting the application to FCA and this can include engaging with compliance professionals to assist you with this application. The FCA are also keen to see a willingness of applicants to engage with the regulator by being open and honest and proactive in responding to requests for information
Once your application has been submitted the FCA will review its content to ensure you are Ready, Willing and Organised. Any substantial changes after submitting an application may require the application to be withdrawn and resubmitted.
How can Effecta help?
We can manage your entire application or assist you with specific issues or requirements depending on your needs. When managing an authorization we will begin by advising you on the permissions required and assist you with drafting your regulatory business plan which will form the foundation of your application. Once completed we will advise you on the specific regulatory obligations depending on your activities as well as the competency requirements for senior management and other staff.
We will then assist you in completing the relevant application forms and drafting the supporting Compliance documentation. Following submission we will continue to assist you with any further requests for information and also prepare your senior management for meeting with the FCA.