May 9, 2024 by Clare Curtis

Common Errors When Applying for Asset Management Authorisation

The Financial Conduct Authority (FCA) has published its findings on common errors by Asset Management Companies when applying to the FCA for authorisation.

Disclosing this information should hopefully assist firms in their authorisation application process.

Between April 2023 and April 2024, the FCA blocked and/or withdrew 18% of 310 firm’s applications seeking authorisation to operate and conduct business in the Asset Management sector. Of the 310 applications, 56% were approved in 6 months and 73% were approved within 8 months.

Please see below some key points that the FCA  insists on and that firms seeking authorisation should take into account when applying for authorisation. Those include:

The expertise and/or qualifications of Senior Management.

There were several applications presented to the FCA that failed to meet the requirements and expectations of the FCA in this regard. There were instances where Senior Management personnel named on the application were not able to meet the expertise levels required of them to fulfil the functions laid down on the application. In addition, a number of named applicants did not hold the appropriate level of seniority within the firm to be classified as ‘Senior Management.’

Offices located outside the United Kingdom:

The FCA expects the ‘Mind and Management’ of a firm to be situated in the UK, making the most important decisions for the firm, overseeing outsourced activities as well as their normal day-to-day activities.

Having Compliance and/or Administration based in the UK does not meet the full criteria, neither does the decision-making personnel flying into the UK from time to time.

Business models/Exposing Clients to risk:

The FCA acknowledges that all business models can pose some risk to the firm’s clients, and therefore it expects all applicants to:

  • Identify all risks their models might pose to clients
  • Adequately consider and evidence how they can mitigate the said risks.

Some applications received by the FCA were viewed as posing unacceptable high levels of risk to the firms’ customers, especially retail clients.

When it comes to retail clients, firms are required to be able to demonstrate how they apply the Consumer Duty Rules when engaging with those retail client.


Some applications received by the FCA appeared to have been negligent when it came to considering relevant rules attached to their businesses, as well as their responsibilities and impact on their business when outsourcing. Firms need to remind themselves that all responsibilities and oversight still remain their obligations.

Conflicts of Interest

All Asset Management firms must take into account any conflicts of interest that could arise between:

  • The client
  • The firm
  • The related parties

All potential conflicts of interest need to be addressed before the application is submitted, with a plan in place to avoid or mitigate them.

If such risks have not been identified by the firm but are identified by the Regulator, the FCA will consider whether the applicant is aware of any risks posed, and in turn might negate the application.

Unready, Unwilling and Unorganised

The FCA noted a number of applications displaying the fact that the applicant did not appear to be ready, willing and organised. This included not having employed relevant staff for their roles, or that the firm did not possess sufficient capital.

The FCA carried on to state that it does understand that situations and circumstances can change, sometimes dramatically, during the lifecycle of an application, but it is not willing to put  applications on hold indefinitely or to extended them  for long periods of time. In addition, the FCA will not accept significant alterations to the proposed model, in particular changes to the target market.

If either of the above scenarios occur, the FCA will expect the firm to withdraw the application, make the relevant and necessary alterations to it and then re-apply.

Financial Crime Guidance Update

The FCA have published a Consultation Paper (CP), on proposed alterations to their Financial Crime Guide regarding sanctions, proliferation financing and transaction monitoring, as well as proposals to add references to Crypto assets in the Consumer Duty (The Guide), alongside consequential changes throughout the Guide.

The FCA expects these changes to assist firms in understanding what is expected from them whilst assessing the adequacy  of their Financial Crime systems and controls, and  to enable the firms to remedy any deficiencies they may discover.

This CP will be of interest to:

  • All FCA Financial Crime supervised firms.
  • Firms that the regulator supervises under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, including crypto businesses as well as several other firms.

Big Tech Firm and The Financial Services

The FCA have issued its summary of the analysis from the responses it received on its “Call for Input” regarding potentially poor consequences for competitiveness on Financial Services firms by the growing input from Big Tech companies.

After desiring to identify potential competition benefits and harms from Big Tech on the Financial Sector, the FCA swayed towards a particular perturbance they had, insofar as how the asymmetry of data between Big Tech and Financial Services firms could inflict significant unfavourable implications on how competition evolves in the Financial Sector in times to come.

The FCA is seeking to ensure that Big Tech firms do not acquire market power, whilst still embracing the potential benefits from Big Tech entry and expansion.

This feedback will be of interest to:

  • Regulated Financial Services Firms
  • Big Tech Firms
  • Smaller Challenger Firms
  • Trade bodies of regulated firms
  • Consumers
  • Groups representing Consumers interests.

New Method of Paying For Research/Bundling

Please note Effecta will be producing a more in-depth article on this subject imminently. Here is just a quick overview.

The FCA announced its plan regarding a new system for firms to pay for Investment Research and is requesting feedback from firms on those.

After analysing current payment methods, the FCA, although accepting that Asset Managers (AMs) are in general acquiring the research they need, believes that the current payment options can be complex and potentially favour the larger AMs. In addition, the current rules can limit the ability to purchase research from overseas.

The proposals put forward by the FCA look to present AMs with more freedom on how to pay for their research, enhancing the ability for AMs to use different models and sizes to obtain the information, and thus, promoting a healthy competition.

This will allow AMs the capability of ’Bundling,’ and in turn making it simpler to purchase research in the UK and from overseas.

The FCA is hoping to have final rules regarding the above in place in the first half of 2024, but this will depend on the amount of feedback it receives, and the quantity and quality of information provided.