10 Steps to FCA Authorisation
The prospect of preparing and submitting an FCA application and the numerous challenges this poses can be overwhelming and things can quickly become disorganised if the right individuals aren’t effectively engaged and a good degree of project discipline isn't maintained for the duration. In this brief article we’ve set out 10 key milestones to FCA authorisation that any firm considering making an application should consider. If preparing an FCA authorisation is a serious prospect for your firm then be sure to download our free FCA Application Guide here.
This document provides a thorough overview of all the areas you need to consider when preparing an FCA application and will serve as a perfect preparatory tool for the following type of business:
Consumer credit lenders/finance providers
Debt collection businesses looking to operate in the consumer credit market
Debt buyers purchasing consumer credit regulated portfolios
So, without further ado, let’s look at these ten steps to FCA authorisation…
1. Determine whether you need to be FCA authorised
The first question to be answered is whether your business activities require FCA authorisation. If your activities have nothing whatsoever to do with financial services, either directly or indirectly, then naturally the likelihood of you needing to apply to the FCA is greatly reduced. I imagine for the vast majority of you reading this, however, the decision will not be as straightforward – if it is immediately abundant that your business model involves FCA-regulated activity then, again, the decision around this first step is simplified - but what about those cases where your business is involved in activity that might fall into one of several regulatory grey areas? Well, in this instance you will need to work out whether there are any exemptions that may apply to your activity that mean FCA authorisation is not required. A good understanding of the FCA’s “perimeter guidance” (PERG) is essential here and it is recommended that you seek external advice if you are unsure as to whether a limitation applies to your firm or not.
2. Establish whether you need to seek Full or Limited Permission
Assuming you require some form of FCA authorisation, before commencing work on your application it is recommended that you confirm whether Full Permission is required. Some firms are only required to apply for Limited Permission to carry on regulated activity. Whether you need to apply for Limited Permission or Full Permission depends on a number of factors, not least the activities - both regulated and otherwise - your firm will carry out. Again, the process of bottoming this out can be quite complex in some cases and may be something worth getting professional advice on. As a guide, however, you can use the FCA’s decision-making tool to find out whether you need to apply for Limited or Full Permission. You should bear in mind that your authorisation application will be delayed if you apply for the wrong permission category.
3. Consider your strategy
Linked to this last step is consideration of your overall regulatory strategy; which regulated activities do you intend to seek permission for, bearing in mind the impact of each on timeframes, costs, capital and applicable rules? Central to this assessment is determining who is best placed within your organisation to undertake key senior management roles, particularly those roles that will require individuals to make an Approved Persons application to the FCA, including Executives, Directors, the Compliance Officer and the Money Laundering and Reporting Officer.
4. Prepare your regulatory business plan
Perhaps the most onerous aspect of the FCA application process is the creation of a dedicated and detailed regulatory business plan that must be uploaded to this part of the application as a separate document. The plan must convince the FCA that you have considered and assessed the key risks posed to your business and its customers and that there are appropriate safeguards in place to mitigate against these. As such, it will be a lengthy and detailed document and ample time should be allocated in advance to its preparation. It is recommended that your regulatory business plan is independently reviewed by an experienced compliance practitioner prior to submission.
5. Prepare the core of your firm application
This will involve the collation of a significant amount of information across multiple business areas and the time and resource required here should not be underestimated. Our free guide breaks this aspect of the application down into further detail but, at high level, in addition to the regulatory business plan you will need to prepare the likes of the following:
Basic firm details
Permissions sought and regulatory fees
Business continuity plans
Consumer credit activities
Disclosure of significant events
Systems and Controls
Compliance controls
Personnel information
Owners and influencers
Corporate partner/controller information
6. Identify Approved Persons and prepare individual applications for each
In addition to the preparation and submission of the firm application, you will also be required to prepare and submit at least one Approved Persons application. Approved Persons are senior managers and decision makers within the business whom the FCA must personally approve to undertake their role. Many consumer credit firms will only require one Approved Person but this depends on the size, scope and nature of the regulated activity undertaken, as well as the firm’s organisational structure and apportionment of responsibilities. Approved Persons applications involve a significant amount of further information about these individuals that must be provided as part of your application – much of which relates to the FCA's assessment of the fitness and propriety of the candidate to hold the position. Bear in mind also that the Approved Persons Regime is soon to be replaced by the Senior Managers & Certification Regime, so you will need to ensure you modify your approach accordingly if you seek approval for your senior management after the cutover to the new regime.
7. Create your application on CONNECT
The FCA’s online CONNECT system must be used to submit your application and supporting documentation and is also the mechanism by which you will provide the regulator with ad-hoc notifications (whereas scheduled regulatory reporting is submitted via their GABRIEL system).
Before you begin preparing your application, it is a good idea to ensure you are registered to be able to use Connect.
8. Build/bolster your compliance framework
Ensure you have core compliance policies and procedures in place and prepare a risk-based monitoring plan that will robustly test your business on an ongoing basis against applicable laws, regulation and guidance. Take steps to bolster your existing governance arrangements so that the compliance message becomes embedded and accountability and responsibility promoted across all levels.
9. Submit your application
Submit your application through CONNECT, paying the required application fee. Once submitted, it takes between two and six months for the FCA to allocate your application to a case officer. If the incorrect regulatory permissions have been applied for or the FCA consider your application to be incomplete, expect delays in receiving authorisation.
10. Reply to questions and meet any conditions
Your case officer will ask questions, usually in batches sent by email. Once they are satisfied you have answered these sufficiently (and providing your firm and its Approved Persons are deemed to meet the FCA’s threshold conditions and be fit and proper), the FCA will provide its authorisation. They may attach conditions to their authorisation, for example, requiring you to put capital into your business.
