How to Apply for FCA Authorisation

Four steps to FCA Authorisation

If your business is thinking about applying to the FCA for permission to carry on a regulated activity, first of all, congratulations!... now the hard work begins.

It is important to understand the scope of the work required from the start of the journey. Setting off with a clear road map will make the process smoother for your firm and enable you to approach the project in a controlled and efficient manner.

Getting your business ready to apply for FCA permissions can be a time intensive investment as you must be able to demonstrate that your business is both willing and capable of complying with the applicable regulations. This will be closely scrutinised by the FCA throughout the process, and it must be able to withstand the regulatory lens that will be applied to it in order to gain authorisation.

We have published this article to help your understanding around some of the key elements that form part of your FCA application, as well as some tips and general guidance:

What do I need for FCA authorisation?

Business Plan

The business plan is the single most important document that you will submit to the regulator and is often an area that is underestimated in terms of both the content and level of detail required. The plan tells the FCA about your business; its governance structures, the business model and product(s), and crucially, customers. All these elements, and more, will need to be clearly articulated.

It is natural that in some business, the document may refer to future plans whilst ensuring short term stability, the FCA do focus on the likelihood the firm will survive. Remember; the FCA will assess the content of this document. The regulator will be looking to see that your firm does what it says it does; the content must be able to stand up to scrutiny. When business plans stray too far from the reality of a firm’s current state, or if future proposals are disproportionate or appear unreasonable, that is when the regulator is likely to conclude that your firm is not yet fit for authorisation.

Compliance Monitoring Plan (CMP)

The compliance monitoring plan, another key piece of documentation, sets out your firm’s plan to monitor on-going compliance with the regulations that it has said it is both committed to and capable of complying with as a result of becoming authorised. Your firm’s CMP must, at least at the most basic level, demonstrate that your firm understands the full scope of regulations that it must comply with, and be able to monitor compliance with each. Having an annual calendar view within this document is best practice and provides the regulator with a clear compliance road map for your firm. This will help to illustrate to the FCA that you understand your regulatory obligations.

Policies and Procedures

Your firm must understand the key regulatory topics salient to nature of your business and the products you will bring to market. A few key areas may well be financial difficulties and vulnerability, affordability, SM&CR, and of course, the Consumer Duty.

The application must demonstrate adequate policies setting your position on these topics, not only to demonstrates that you understand what you must do to comply with the regulations, but to ensure that you have adequately set the tone and the required standards across your business for all employees to understand and execute against.

Another key element to consider here is governance and risk management; your policies should make clear your approach to how your business is governed, particularly concerning the how, when, where and by whom, with regards to decision making within the business. 

SM&CR

Any firm applying for FCA authorisation must take the time to understand the Senior Managers and Certification Regime (SM&CR). The regime sets clear expectations for how a firm should assign responsibilities and ensure that senior individuals are both competent and accountable for their actions, not just when they join the business but ensuring they remain fit throughout their tenure at your firm

Having a solid grasp of the SM&CR will help your firm put the right governance and oversight structure in place from day one, reducing the risk of compliance issues later on. It also shows the FCA that the firm takes its regulatory duties seriously and is committed to maintaining high standards of conduct and integrity. An effective place to start here is by designing a meaningful organisation chart which maps responsibilities to roles and departments. This allows you to understand any gaps in oversight or areas that may require more thought, and can be invaluable in terms of informing the wider application materials

Conclusion

One of the biggest mistakes we see from firms is under-estimating the level of work involved in an application, particularly concerning the business plan. Your business model must be clear, products must demonstrate clear consumer value, and you must evidence that you understand all the segments of your target market. The business plan must reflect your practices as a business; it can’t just be ‘words on paper’. They should reflect the effectiveness of your firm’s systems and controls and an adequate understanding of its products and the markets within in which it operates, as well as its regulatory responsibilities and, crucially, its customer base. If the application materials cannot withstand appropriate scrutiny, your application is unlikely to be successful.

Next Steps

We have a number of templates to assist you with your application online, including the business plan, to download these visit: FCA Application Templates | rbcompliance