How to get FCA authorised (part 1)


We are launching a new How To series on 'How to get FCA authorised'. This will look to cover a range of key items your business should consider from the location of offices, expected fees to resourcing. We will start on the first few key areas covering

  • firm resources

  • disclosures

  • risk management

  • business model

If you would like further detail on an area covered, feel free to reach out to the team.




Your firm resources


Your senior management will need to be available to carry out their roles and be based in the UK. They will need to be focused on their roles, so as not to hold other significant functions elsewhere. You should review your succession plans and ensure there is no key man dependency.

In addition to your senior management, you will need to ensure your offices, IT systems, disaster recovery plans, and compliance arrangements are adequately resourced. With regards to your compliance arrangements, this will need to be assigned to senior management with a competent compliance background (e.g. experience and qualifications).

Should you have any controllers (firms or individuals) you will need to disclose their location, level of influence, and any material disclosures.


Disclosures

The regulator is keen to understand the fitness and propriety of you and your senior team. It will assess the experience of the relevant senior management to the intended business of your firm. If you or your senior team have inadequate or dated experience, this could signify a lack of appropriate experience for the role(s). You will also need evidence that there is no history of debt issues or CCJs applicable to you or your team.

If there is any negative historical information, this will need to be disclosed. In addition, any information concerning your fitness and propriety will need to be explained. Any such response to the regulator will need to be clear and not misleading. Remember, the regulator is looking to understand if there are concerns over your honesty, integrity and reputation.

When disclosing information, you will need to provide evidence of how this information has been rehabilitated since the event. This can take the form of character references.

If you have had any previous enforcement actions taken against you or your firm, you will need to disclose it and demonstrate how your firm has made improvements since the action.

Risk management overview

The regulator is seeking to understand if you have effective processes to identify, manage, monitor, and report risks you have or might be exposed to.

In particular, you will need to ensure that you have clearly articulated:

  • The inherent risks to consumers

  • Gap analysis that these risks have been considered

  • How your controls relate to identified risks

This will need to be shown in your regulatory business plan, included in your FCA application and relevant policies and procedures.


Business model


It is crucial that your business model provides the regulator with clarity on how your firm makes money, and what risks may be prevalent for consumers.

You will need to provide the FCA with a regulatory business plan setting out the rationale for making the application. The FCA is not looking for a lengthy document, generally, a 10-12 page business plan is about the right length. It should cover:

  • Background information about your firm and the permissions it is seeking to hold; Information about the services you will provide;

  • The governance arrangements of your firm;

  • The fitness and propriety of any other persons applying to hold controlled functions;

  • Main business risks the firm faces and how these are mitigated;

  • Compliance monitoring controls;

  • How does your firm meet the FCA authorisation threshold conditions;

  • Your growth plans over the next 3 years

  • Most importantly: Is your business model aligned to the interest of treating customers fairly?

 

Did you know that MEMA has created content on the above in the form of an ebook guide?

If you would like further detail on the FCA authorisations process, please reach out to the team.