The Financial Conduct Authority’s (‘FCA’) intentions under the Financial Services and Markets Act 2000 (‘FSMA’) is to ensure that relevant markets function well and the operational objectives are:
- to secure an appropriate degree of protection for consumers;
- to protect and enhance the integrity of the UK financial system; and
- to promote effective competition in the interests of consumers.
The FCA’s publication ‘Our Approach to International Firms’ should assist international firms to understand the FCA’s expectations and how to manage risks appropriately when providing regulated financial services within the United Kingdom.
Firms must understand and be compliant with the FCA’s minimum standards for authorisation, namely the threshold conditions which are set out in Schedule 6 to FSMA and the FCA’s guidance in the ‘COND’ part of the FCA Handbook.
Firms seeking Part 4A permissions under FSMA need to meet the relevant threshold conditions. When deciding whether to authorise an international firm, the FCA will apply the same standards with the equivalent statutory objectives in mind for UK firms. Once authorised, firms need to meet the minimum standards at all times.
Factors which international firms need to consider are, for example, the nature of their UK and overseas operations, their personnel or decision‑making structures, and their systems and controls.
As part of that assessment of international firms against the relevant minimum standards, the FCA also considers the firms’ potential to cause harm and the mitigation available.
International firms should also be aware that the FCA expects them to continue to meet these minimum standards at all times after authorisation as part of the FCA’s wider supervisory approach.
The approach the FCA’s take when assessing an international firm is broadly shown in the diagram below:
When assessing the firm against minimum standards, the FCA considers it against their general expectations, for example, around:
- the nature of the firm’s operations;
- the firm’s personnel and decision-making;
- the firm’s systems and controls; and
- the factors relating to the firm’s home state.
Additionally, consideration is given to the extent to which the firm presents and offers adequate mitigation against the risks of harm it poses, including the 3 risks described in the FCA’s Consultation Paper and any other relevant risks of harm applicable for the firm.
If your firm requires assistance with the FCA’s approach to authorisation and/or meeting the FCA’s Threshold Conditions on an ongoing basis, please do not hesitate to contact Scott Robert for assistance.
See the FCA’s publication here: https://www.fca.org.uk/publication/corporate/approach-to-international-firms.pdf