Audit and Accounting
How to become authorised and regulated by the Financial Conduct Authority (FCA) in the UK
If your firm is looking at carrying out any of the regulated financial activities in the UK which are set out in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), then you are likely to need to become authorised and regulated by the FCA before you commence those regulated activities.
As a result of Brexit, the UK is no longer part of the EU MiFID passporting arrangements, meaning firms within the EU will need to apply for FCA authorisation to enable them to carry out regulated activities in the UK.
Whether you are a consumer credit firm, investment firm, or other financial services provider, you will need to prepare your application well in advance.
Types of firms that require FCA authorisation:
- Consumer credit firms
- Investment firms
- Banks, credit unions, and insurers
- Benchmark administrators
- Credit rating agencies, trade repositories, and securitisation repositories
- Payment services and e-money firms
- Claims management companies
A list of the financial activities that the FCA regulates can be found here.
The FCA application process
You will need to prepare a thorough regulatory business plan as part of your application, as well as other documents such as a compliance manual and compliance monitoring program, financial projections including balance sheet, profit, and loss, capital and liquidity/cash-flow forecasts, risk management, and governance frameworks, IT systems, policies and procedures (such as financial crime policies), and senior management responsibilities.
Some firms, such as payment service providers, e-money institutions, and small registered UK alternative investment fund managers may only need to be registered with the FCA rather than becoming fully authorised, which often means that their activities are considered to be lower risk and require less supervision by the FCA.
The preparation of all required FCA application documents can take between 6 to 9 weeks, depending on how quickly the firm can gather the necessary information. Once the application is submitted, the FCA will confirm receipt of the application within 2-3 working days and will contact the applicant within approximately 3 weeks to advise of the case officer who has been assigned to the application. The case officer will handle all communication relating to the process, and a firm should expect the case officer to ask questions pertaining to its application on several occasions.
It could take between 3 to 6 months (or longer) for the FCA to complete their review and to grant approval, however, the FCA has up to 12 months to review and decide whether they should authorise the firm or not. More complex firms will usually take longer to obtain FCA authorisation than more straightforward firms.
The FCA typically splits applications into three categories: straightforward, moderately complex, and complex. The more complex the application is, the higher the application fee is (which is non-refundable regardless of whether the application is successful or not). Depending on the application type, the fee can range from £250 to £200,000, with most firms likely to be in the region of £1000-£10000. This is a one-off fee that is payable prior to submitting the application, however, the firm will also have to pay the FCA an annual fee each year going forward upon authorisation.
It is important to note that the FCA fee is not the same as the level of capital required of a firm to hold in order to be regulated. The level of capital required depends on the type of firm, the regulated activities it seeks to carry out, and the volume of business it will generate.
To see the FCA’s steps for a firm to become regulated, see this flow chart.
How can Gerald Edelman help?
Gerald Edelman can assist you with your FCA application, whether that be full project management of the application process including full document preparation, or guiding and supporting you through the process.
It is important that you seek appropriate external regulatory advice when preparing an FCA application, as incorrect and/or incomplete applications can lead to unnecessary delays or even failure to achieve your objective of becoming authorised by the FCA. Gerald Edelman’s regulatory consulting team has in-depth knowledge and a wealth of experience in taking firms through the FCA authorisation process, plus we are able to assist you on corporate structures and tax matters, which often form part of a firm’s initial setup prior to the submission of a firm’s FCA application. Gerald Edelman is able to offer a full-scope service to meet your FCA and company structure needs.
Gerald Edelman also provides regulatory consultancy to FCA regulated firms, which covers amongst other matters, FCA conduct compliance, prudential (capital and liquidity) regulation, regulatory impact assessments and gap analyses, risk and governance frameworks, Senior Managers and Certification Regime reviews, client money reviews and audits, and FCA remediation.