Top Tips When Seeking FCA Authorisation

Top Tips When Seeking FCA Authorisation

For firms seeking authorisation by the Financial Conduct Authority (“FCA”), it can be a confusing time navigating the complicated application process.

Haydon Thomas, Associate Director of Newgate Compliance, with over 20 years’ authorisation experience, provides some top tips to getting firms authorised.

Planning ahead

It can take approximately 18 weeks for the FCA to complete its review of an authorisation application. It is important to factor this into your firm’s planning and timescales. Once submitted, it takes around 3 or 4 weeks for a case officer to be appointed to review your application.

The timescale for a decision depends on the complexity of the application, any issues raised by the case officer and whether you need to provide follow up documentation. The statutory timeframe under FSMA for the FCA to determine your application depends on whether it is “complete” (6 months) or “incomplete” (12 months). Do not be alarmed! The case officer will deem an application complete when they have all of the information necessary to make their decision.

It is perfectly acceptable to submit the authorisation application and follow up with certain documents that the FCA would expect to see once they are ready. Our advice is to use that 3 or 4 week period from submitting the application and hearing from the case officer to prepare any outstanding documentation, so you can send it to the case officer once they will undoubtedly ask for it. This includes items such as the investment advisory/management agreement or fund offering documents.

A clear and concise Regulatory Business Plan

You will need to provide the FCA with a regulatory business plan setting out the rationale for making the application. The FCA are not looking for War and Peace … generally an 8 to 10 page business plan is about the right length. It should cover:

  • Background information about the firm and the permissions it is seeking to hold;  
  • Information about the services it will provide;  
  • The governance arrangements of your firm;
  • The fitness and propriety of any other persons applying to hold controlled functions;  
  • Main business risks the firm faces and how these are mitigated;
  • Compliance monitoring controls; and
  • How the firm meet the FCA authorisation threshold conditions.

Financial Projections – Not too cautious but not too optimistic

The FCA requires a 12 month forecast broken down monthly (P&L, Balance Sheet, Cashflow and Regulatory Capital) and projected balance sheet figures for years 2 and 3.

The financial projections need to be realistic for the size and nature of your business. We recommend erring on the side of caution and not being too overly optimistic in your revenue forecasts.  Show any revenue from unregulated business separately as only revenue from regulated activity is taken by the FCA when calculating your annual FCA fees.

You must demonstrate that you will have sufficient capital from the authorisation date and any projected start-up costs (e.g., lawyer fees, compliance consultant fees…even the FCA application fee!). If you are forecasting trading losses, the amount of capital at authorisation covers these losses. The FCA would also expect to you to have a buffer of around 10% of the capital you need to hold.

How Newgate can help

Newgate Compliance is unrivalled in the experience and skill of its team when dealing with FCA authorisation applications. The Newgate team has an unblemished success record in obtaining authorisation for over 200 wholesale clients. The team have combined knowledge of over 15 years’ experience of working within the authorisation department at the regulator where they have led teams of case officers, formulated authorisation policy and implemented new regulatory developments.

Newgate Compliance will project manage your application, working closely with your other service providers to ensure that the application is of high quality and the license obtained fully covers the needs of your business. We will liaise with the FCA throughout the application, using our technical knowledge and understanding to minimise application times and to ensure that your relationship with the regulator starts from a strong position.

For more information on our FCA application service please contact the Authorisation Team.