The process of obtaining FCA authorisation can be long and complex, requiring significant effort and resources from financial services firms. However, making mistakes during the authorisation process can cause delays, additional costs, and even lead to the rejection of the application. In this blog, we discuss some of the common mistakes that firms should avoid during the FCA authorisation process and provide guidance on how to prevent them.
Incomplete or inaccurate application
One of the most common mistakes that firms make during the FCA authorisation process is submitting an incomplete or inaccurate application. The regulator requires that firms provide detailed information about their business, including their management structure, financials, systems, controls, and compliance processes. Providing incomplete or inaccurate information can lead to delays in the application process and even rejection of the application.
To help avoid this mistake, firms should ensure that all the required information they provide is accurate and complete. The information should also be consistent throughout the application and include the firm’s other documents and materials, such as business plans and marketing materials. If the regulator requests additional information, firms should provide it promptly and transparently.
Take for example, a firm that is applying for authorisation to provide investment advice. In such an instance, the firm needs to provide details about its advisory services, such as the types of investments it advises on, its approach to managing conflicts of interest, and its policies on disclosure and record-keeping. The firm should ensure that it provides accurate and complete information on all these aspects and supports them with evidence such as client agreements, training materials, and compliance policies.
Inadequate governance and controls
Not having adequate governance and controls in place, is another common mistake that firms can make during the authorisation process. The FCA requires firms to demonstrate that they have robust governance structures, internal controls, and risk management processes to ensure that they can operate effectively and meet regulatory requirements.
To meet these requirements, firms should make sure that they have clear and well-defined governance structures, including a board of directors or equivalent oversight body, and senior management with relevant experience and qualifications. They should also have documented policies and procedures for all key functions, including compliance, risk management, and internal audit. These policies and procedures should be regularly reviewed, updated, and tested to ensure that they remain effective and relevant.
For example, suppose a firm is applying for authorisation to operate as an electronic money institution. This firm would need to have clear policies and procedures for managing customer funds, preventing financial crime, and maintaining appropriate records. They should also have effective controls to ensure that these policies and procedures are followed, such as regular training for staff, independent audits, and reporting to senior management and the board.
Inadequate risk assessment
Another mistake that firms make during the authorisation process is not conducting adequate risk assessments. The FCA requires firms to demonstrate that they have identified and assessed the risks that they face and have put in place measures to manage and mitigate them.
To avoid this mistake, firms should conduct a comprehensive risk assessment, covering all aspects of their business, including operations, financials, compliance, and conduct. The risk assessment should be based on a clear and consistent methodology and should consider all relevant factors, such as the firm’s size, complexity, and business model. The firm should also have clear risk appetite statements that reflect its risk tolerance and ensure that all risks are appropriately managed and monitored.
Not having adequate policies and procedures in place
As part of the FCA authorisation process, firms are required to have policies and procedures in place that outline how they will operate in a compliant manner. This includes policies and procedures for things like data protection, complaints handling, and financial crime prevention.
Not having adequate policies and procedures in place can be a major stumbling block in the authorisation process. It is essential that firms take the time to carefully develop and implement policies and procedures that are tailored to their specific business activities and that meet the FCA’s requirements.
Failing to meet the FCA’s financial requirements
Firms seeking authorisation must meet a number of financial requirements, including minimum capital and liquidity requirements. Failure to meet these requirements can result in delays in the authorisation process or rejection of the application.
It is essential that firms seeking authorisation take the time to carefully assess their financial position and ensure that they are able to meet the FCA’s requirements. This may involve taking steps such as raising additional capital or restructuring the business to ensure that it meets the FCA’s financial requirements.
How Neopay can help
Neopay is a leading regulatory compliance specialist in the e-money and payments markets. Our team of experts have decades of experience in helping firms navigate the FCA authorisation process.
We can help with all aspects of the authorisation process, including:
- Preparing and reviewing the application to ensure it is complete and accurate
- Advising on the regulatory requirements and expectations for your specific sector
- Providing guidance on internal processes and controls to ensure compliance with FCA requirements
- Supporting with communication and engagement with the FCA
- Advising on record-keeping requirements and providing guidance on best practices
Our team has a proven track record of success in obtaining FCA authorisation for our clients. We can help you avoid the common mistakes that firms make during the authorisation process and ensure that your application is submitted accurately and efficiently.
The FCA authorisation process is complex and time-consuming, but by avoiding the common mistakes outlined in this blog and seeking expert guidance from Neopay, firms can improve their chances of success. It is worth noting that the same principles outlined here also apply to authorisations with other regulators, whether in Europe or elsewhere in the world, and Neopay can also assist with those. With our experience and expertise, we can help you navigate the authorisation process with confidence and ensure compliance with FCA requirements, or other regulatory requirements. Contact us today to find out how we can support your business.