Claims management companies (CMCs) have until March 31 to submit their application to the Financial Conduct Authority (FCA) for the temporary permission they will require to continue operating under the new regulatory regime from April 1 onwards.
However, whilst it is vital that CMCs do not miss this deadline, they also need to be turning their attention to the application for full authorisation they will need to submit once their temporary permission is active. The information required in a temporary permission application will be fairly basic, but in the full authorisation application much more information will be required.
The FCA expects CMCs to submit an application for full authorisation in one of two application periods:
- April 1 to May 31 2019 for:
- All CMCs whose entire activity is connected to financial products and services, except for companies who only carry out lead generation activities, and
- All CMCs who are new to regulation, such as those based in Scotland
- June 1 to July 31 2019 for all other CMCs
Given that all CMCs will need to have submitted this application by the end of July, and many will need to have completed it by the end of May, companies are strongly recommended to start preparing now. These deadlines will only be extended where the FCA agrees there were ‘exceptional circumstances’ that prevented a CMC from meeting their deadline. If companies miss these May 31 or July 31 application deadlines, they will lose their permission to conduct claims management activity.
Essentially what the FCA wants to see in a full authorisation application is a ‘regulatory business plan’. In some ways, the content of these will differ from the sort of business plan that might be compiled, for example, to attract potential investment.
The FCA asks CMCs to provide details of:
- The legal structure of the company
- The sectors the company will operate in, e.g. financial claims, personal injury, housing disrepair
- The company’s aims and objectives, e.g. desired market share, expansion plans, general business strategy in the next few years
- Its governance framework and key personnel – it is recommended that a full organisational chart is included here
- How the key personnel can demonstrate the skills and experience required to carry out their roles competently
- The key conduct risks facing the company, and how these risks will be managed
- Whether the company has any plans to outsource activities
- Financial projections for the next three years
- How customers will be sourced – this must include details of any lead generators the company intends to use
- Any unregulated activities the company will carry out in addition to its FCA-regulated business
- Promotions and client communication materials the company intends to use – this would include any websites
Once a full authorisation application has been submitted, it is commonplace for the FCA to contact the company to seek clarification on certain points, and the regulator may also request additional information in certain areas.
CMCs should also expect to have to submit a third application to the FCA later in the year. The Senior Managers & Certification Regime will apply to all claims companies from December 9 2019, and by September 9, CMCs will need to have submitted an application to the FCA detailing which individuals they wish to be approved to carry out Senior Management Functions. All CMCs will need at least one individual to be approved, and those with annual turnover of more than £1 million will need at least two individuals to be approved.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article