Applying to the FCA - all you need to know

In the UK, any business that carries out regulated activities must be authorised by the Financial Conduct Authority (FCA), unless they qualify for an exclusion or exemption. The process of obtaining FCA authorisation can take as little as 6 months for well-prepared applications, but incomplete applications may take longer. This article aims to provide the essential information about FCA authorisation to help ensure a successful application.

FCA authorisation is necessary for all authorised financial services firms in the UK, except those regulated by the Prudential Regulation Authority. The FCA's main objectives are to protect customers, enhance market integrity, and promote effective competition. The FCA exercises various functions such as supervising authorised firms, creating rules, providing guidance, and taking enforcement action against rule-breaking businesses.

If a business conducts regulated activities in the UK, it must be authorised by the FCA, unless it qualifies for an exclusion or exemption. Once authorised, businesses must meet a set of minimum standards and pay an annual fee. Failure to meet these standards can result in the FCA imposing requirements, varying permissions, or even canceling the authorisation.

If you are engaged in financial services in the UK, it is likely that you will require FCA authorisation. Conducting regulated activities without authorisation where required can lead to criminal offenses punishable by imprisonment and fines. If you are unsure whether your business activities require FCA authorisation, it is advisable to seek assistance from compliance experts like Get Authorised.

Preparing to apply to the FCA

To prepare for FCA authorisation, firms should take regulation seriously and plan how they will meet the FCA's standards. The FCA looks for applicants who are ready, willing, and organised to comply with the current and future rules and guidance. Positive indicators include reading information on the FCA's website, seeking legal/compliance advice, and clearly articulating regulatory obligations.

Applicants should also demonstrate their willingness to comply with the FCA's authorisation process by being open, proactive, and cooperative. Being timely and available to address inquiries is also important. Additionally, applicants should have the necessary supporting documents and arrangements in place to comply with regulations from the day they are authorised.

Before filling out an application form, firms should consider various key issues such as meeting the FCA's threshold conditions, determining the type of regulated activity they will be carrying on, preparing a business plan with associated risks and resources, and understanding the relevant rules in the FCA Handbook.

Threshold Conditions

The FCA's threshold conditions are the minimum requirements that a business must meet to obtain and maintain authorisation. These conditions relate to appropriate resources, business model suitability, effective supervision, location of offices, and suitability of the firm itself.

To apply for FCA authorisation, you need to fill out the appropriate forms and submit them along with the required fee to the FCA. You may also need to provide additional information, clarification, or evidence to support your application. In some cases, you may need to meet with the FCA to discuss your plans before submitting your application. The FCA aims to make a decision on complete applications within 6 months, but incomplete applications may take up to 12 months.

If your application is successful, the FCA will provide a confirmation of your authorisation, specifying the regulated activities you are permitted to carry out and any requirements or limitations. If the FCA does not consider your application to meet the required standards, it may refuse the application or suggest that you withdraw and re-submit once any identified issues are resolved.

Two Tier Schemes

For firms carrying out regulated consumer credit activities, there are two supervisory schemes: the full credit authorisation regime for higher-risk activities and the limited permission regime for lower-risk activities. The application process and fees differ for each regime.

Tier 1: Full Credit Authorisation Regime

The full credit authorisation regime is applicable to firms involved in higher-risk consumer credit activities. To be authorised under this regime, firms must demonstrate their ability to meet all of the FCA's threshold conditions. Higher-risk consumer credit activities include activities such as consumer credit lending, credit brokerage, credit information services, credit reference agency services, debt administration, debt adjusting, and debt collection.

Tier 2: Limited Permission Regime

The limited permission regime is a more streamlined regulatory regime designed for firms conducting lower-risk consumer credit activities. This includes activities such as consumer credit lending linked to the sale of goods, consumer hire, credit brokerage where the primary business is selling goods, local authorities, not-for-profit debt counseling and debt adjusting services, and not-for-profit credit information services.

Applying for limited permission involves a shorter application process and a lower application fee compared to applying for full permission.

If you need further information or guidance, please contact us.