11Dec

In November 2018, the Financial Conduct Authority (FCA) issued a new version of its ‘approach to authorisations’ document.

The document begins with a statement of what the regulator expects from the firms it authorises:

“Every day the UK population relies on a range of financial services, from basic bank accounts to car loans, mortgages, pensions and complex investment products. Consumers need to have confidence in these services and the firms and individuals that provide them. They expect the market to be fair, open and competitive. They also have high expectations of those who regulate these firms.”

The FCA describes the principal purpose of its authorisation regime as being the prevention of harm to consumers, by saying:

“We seek to prevent harm by ensuring that all regulated firms and individuals meet our minimum standards. For firms that wish to be authorised or approved under the Financial Services and Markets Act 2000 (FSMA), the minimum standards are the Threshold Conditions and for individuals it is the Fit and Proper test.”

As an example, the regulator cites the example of debt management firms. On commencing regulation of this sector in 2014, the FCA was concerned by the high volumes of complaints these firms were receiving, and by the fact that so many of their clients were “vulnerable” in some way. The FCA says that:

“As a result, we required more information and evidence from these firms at the point of authorisation, to establish that they met our minimum standards, than we did from others that posed a lower risk to consumers.”

The document adds that many debt management firms left the market as the FCA refused their authorisation applications. The regulator was forced to enter into agreements with the Money Advice Service, and with debt management trade associations, to ensure that customers of these firms were not disadvantaged.

Tools that the FCA says it may use when assessing applications from firms and/or individuals include:

  • Information provided in the application
  • Market research and intelligence
  • Calls to the FCA Contact Centre
  • Complaints data
  • The FCA’s experience of supervising similar firms
  • Interviews with the individual / key individuals from the firm

Specifically regarding the authorisation of individuals, the document says the FCA also considers:

  • The individual’s employment and regulatory history
  • Whether they have been involved in misconduct, or any criminal activity or adverse civil proceedings

Prior to making an authorisation application, a firm or individual needs to prepare effectively. Here, the document advises:

  • Looking at relevant information on the FCA website
  • Making enquiries to the FCA’s Contact Centre
  • Seeking legal advice and advice from a compliance consultant
  • Ensuring they are able to clearly articulate their regulatory obligations

Once an application has been submitted, the FCA advises firms to remain available to answer any queries, or provide any additional information, that the regulator requires.

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