The Financial Conduct Authority (FCA) have been publicising the improvement in its authorisation metrics alongside the changes being brought about through its secondary objectives of increasing growth. But is there a real difference for those applying for authorisation at the moment?
Those of us working with FCA authorisations teams regularly are starting to see a difference. Not only have timescales reduced, but the attitude of FCA team members seems to be returning to a more collaborative approach. The FCA appears, at the moment at least, to be moving away from the extreme hardline approach adopted as it tackled its backlogs and returned to a more stable footing.
That said, firms still need to ensure that they are submitting a good quality application and not giving the FCA a reason to reject their application. Although the FCA are being more transparent with firms than in recent years, this doesn’t mean that it is not scrutinising applications thoroughly and expecting firms to adhere to the higher expectations it has instigated over the past few years.
A common mistake made by applicant firms is to assume that they can use template, off-the-shelf frameworks and documentation for the application which can then be adapted once the business becomes operational. This will not work with the FCA and will result in your application being refused.
Your proper planning cannot wait until after authorisation. You need to be at the point of ‘ready, willing and organised’ ideally prior to an application submission. There are some specific elements that can be finished during the FCA review process (finalising your bank account as an example), but the majority of your operations, contingencies, frameworks and processes need to be finalised and ready to go before submission.
While a consultant like Neopay can provide substantial guidance and support throughout the authorisation process, certain key elements will still require direct involvement from your business.
The list below outlines foundational steps where client ownership is essential. Neopay can assist you in developing these areas to meet regulatory standards, but since it’s your business being presented, taking the lead on these core aspects is crucial for a successful application:
- An incorporated business
- A fully documented shareholding structure
- All directors, an MLRO, and any other required staff in place, with relevant experience and knowledge
- A full business plan – description of service, flows, marketing plan, target market, financials
- Gone through the regulations / FCA Approach document to identify your obligations
- A bank account for client funds, or at least to have engaged a bank who is likely to service you
- A ‘working’ IT system
- Partner / outsourcing / service provider contracts negotiated
Neopay can then provide more in-depth assistance with other critical elements:
- Diagnostic analysis of your business and requirements
- Guidance, workshops and training on regulation and application to your business
- Development of regulatory framework
- Documentation of regulatory procedures and controls, including AML, safeguarding, consumer duty etc
- Application collation and review
- FCA liaison guidance
- Practice interviews and advice
Having the above in place is obviously a cost, especially when the company is not operating until the license is approved, however that regrettably is the price to pay for attempting entry into the market. Anything less, and the FCA will realise and the application will likely fail, be that a requirement to withdraw or a rejection, which makes a second submission that much harder.
Things have improved with the FCA. Timescales are much better and the authorisation teams are being more open and collaborative. That said, firms must ensure that they don’t give the FCA a reason to reject and must still understand that authorisation is not a given, and depends as much on the FCA’s perception of your attitude to your regulatory obligations, your readiness and respect for the FCA’s position and your trustworthiness as it does on your documentation and frameworks.
So, if you are looking to become authorised, just be aware that your firm will need to take ownership. We can do a lot to help, but the foundations need to come from your business. Contact us today to find out how we can support your business.
