FCA: New Approach To Applications
Since assuming the role of the conduct regulator for the financial services sector in 2013, little has changed in respect of how the regulator processes applications for authorisation.
The FCA expects firms to complete the application form on Connect, ensuring documents such as financial projections, the firm’s regulatory business plan, and compliance monitoring arrangements are attached. Upon submission they will assess the application to identify whether it can be considered to be ‘complete’, if so, the clock starts ticking as the FCA has six months - under the Financial Services and Markets Act 2000 - to review it.
A few weeks later firms usually receive a notification that a case officer has been assigned to their application, this really gets the ball rolling. The case officer will check the application, including checking whether the firm or senior managers within the firm have any adverse record with other UK or overseas regulators. They check your information against various databases, including criminal offence data, ensuring the data reflects the details provided in the application.
A detailed review is then undertaken. Your regulatory business plan should set out your key business proposition, systems and controls as well as detail your governance arrangements. Only once your case officer is comfortable that your proposals meet the threshold conditions in the FCA Handbook will your application be recommended for approval. That is as long as your senior manager applications are approved as well.
The one area that has significantly developed since 2013 is the senior manager applications. This is due to the Senior Managers and Certification Regime coming into force between 2016 and 2019. Under the previous regime - the Approved Persons Regime - applications were shorter with fewer supporting documents required.
The new Long Form A [the form required for senior manager applications] requires further detailed information, from address history and six years of regulatory references through to evidence of the process undertaken by the firm to identify the need to hire a senior manager and the decision-making process. Additionally, firms must submit the individual’s fit and proper assessment, skills gap analysis and training plan.
At RB compliance we assist clients with hundreds of senior manager applications per year. Our observations are clear, the FCA is reviewing senior manager applications with far greater detail than previously. Whilst the majority of applications still progress without question, the number that are questioned has risen. Usually this occurs because the senior manager has an obvious gap in their experience. For example, we have assisted with applications where the manager had no previous experience working in an FCA regulated firm; the FCA is particularly keen to understand how the firm intends to mitigate the risk the individual does not fully comprehend the standards within the FCA Handbook.
Likely due to the number of historic applications received where the individual had little or no expertise in financial crime, coupled with reduction of such crime being a key cross-sector priority of the FCA, applications for SMF 17, the Money Laundering Reporting Officer, gain greater attention than most other roles. Whilst it is still possible to get such applications through, attention must be provided as to the training plan the firm is putting in place to address the expertise gap.
If you’re thinking of applying for FCA authorisation and need to understand more about the process, common mistakes and pitfalls to avoid, you can contact us at: Robert.firstname.lastname@example.org