The FCA: Examples of Good Practice and Areas for Improvement for FCA Authorisations and Registrations.

On the 11 September the FCA published examples of good and bad practices regarding applying for an authorisation and/or registration – the “Guide”.

The Guide is a concise summary of ‘dos’ and ‘don’ts’ which, whilst not revelatory, are nonetheless important learnings for all prospective applicants. Focusing on three overarching points, lessons shared by the Guide may be summarised as follows:  

Staff with appropriate skills, experience and capacity:

1. Suitability assessments – do explain how you have assessed the fitness and propriety of your key staff.
2. Ownership structures – do provide a clear ownership structure that clearly identifies your Controllers.
3. Staff resource and skills – do provide recruitment and development plans along with timeframes.
4. Staff incentives – clearly explain staff incentives and how they drive good customer outcomes, rather than purely asset allocations or volumes.
5. Understand your regulatory obligations – don’t over rely on your compliance consultant, you need to be ready to engage with the FCA.
6. Time commitments – do clearly explain commitments and responsibilities (and the management thereof) for multi-hatted individuals.
7. Presence (and right to work) in the UK – be prepared to provide evidence and that the business is based in the UK.

Robust Policies:

1. The FCA’s sample business plan – do use!
2. UK decision making – for overseas firms, policies should be explicit in how decisions are made in the UK. 
3. Permissions – do provide analysis of how the permissions you are applying for are relevant to your business activities and refer to legal advice taken and/ or the Perimeter Guidance Manual.
4. Intwine the Consumer Duty – throughout your policies and procedures. Don’t repeat Consumer Duty expectations in a separate document.
5. Customise – your policies to your business so it is clear to the FCA how you plan to implement these.
6. Vulnerable customers – for those with retail business, do consider customer scenarios when designing your systems and controls to avoid poor outcomes for customers in vulnerable situations.
7. Regurgitation of the FCA rules – do document how you intend to comply with the rules, rather than simply repeat them.
8. Compliance monitoring programme – do consider how your business model exposes clients to risk and implement mitigating measures. Don’t just focus on external risks to your business.
9. Incoherent policies – don’t use template policies. Make policies are tailored to your business so that upon review the FCA can understand your day-to-day business activities, and when read together they are coherent.
10. Planned IT systems – do make sure you identify systems you plan to use; whether they are off-the-shelf or custom built, include project plans and realistic timelines. 

Financial resources:

1. FCA template – do use the FCA’s templates provided. They are in a format the regulator understands.
2. Retail Firm Financial Analysis Template; or
3. Wholesale & Consumer Investment Firm Financial Analysis Template.
4. Notes and assumptions – do give context and explanations to support financial information.
5. Evidence – of any funding arrangements and highlight any funding commitments and contingency plans. Smaller firms with less complex funding arrangements can include bank statements.
6. Failure to share historic financial accounts – will delay the FCAs assessment of your application.
7. Submitting inaccurate and incomplete information – delays applications and will generate questions from your FCA Case Officer. Always provide accurate information on how you can meet your prudential requirements.

Key takeaways

Before submitting your application make sure information is accurate and complete, as well as easy to read for your FCA Case Officer. Provide a balanced view of your business and where you have identified gaps, state how you intend to address to fill them. Do not fall foul of the oldest chestnut – using template policies. Take the time to tailor your policies to your business activities, make them practical and avoid regurgitating the FCA Handbook. Finally, use but do not over rely on your advisors; you need to be ready to engage with the regulator and know your obligations!

If you’re considering an application to become FCA authorised we would be delighted to speak. With specialists that have managed hundreds of successful applications we can help you navigate a path to market.

Please visit our dedicated registration services for more information.