As we approach the end of the year, many firms are in various stages of preparation for their FCA authorisation applications. Of course, it isn’t as simple as filling in a quick form and paying a fee. FCA applications require close attention to detail, and failing to do something as simple as ticking any of the boxes your first time round could add unnecessary delays to your application.
As regulatory compliance experts, we’ve been in the business a very long time. We’ve seen what trips firms up and what helps them succeed.
We wrote this post to highlight the standout advice you probably won’t find elsewhere. Read on to uncover five key details you should know about the FCA authorisation process before you submit your application next year.
#1: Applications can take up to 12 months to process
You’ve probably heard some version of the FCA quoting its statutory time frame to make a determination and felt that sense of panic when reading “up to 12 months.” This time frame is generally softened with phrasing like, “We will endeavour to determine an application well within this timeline.”
However, the FCA is not exempt from the capacity woes that plague the general market. Its ability to assign, review, and conclude all types of applications are presently taking far longer than even the extended timelines of early COVID in 2020.
Applications that should have taken six months from submission to approval now take closer to nine months or even longer, so plan accordingly and manage your expectations.
The FCA also warns firms that incomplete applications will create an even more significant delay, so be sure to carefully review everything ahead of submission and catch any of those obvious errors and omissions.
#2: While you must have FCA authorisation to undertake regulated business, you don’t need “direct” authorisation
If applying for direct authorisation seems daunting in both level of effort and timeline, don’t despair—there is an alternative. You can be “hosted” by a Principal firm , either as a temporary or long-term solution, depending on your firm’s needs.
Regulatory hosting essentially means that you can borrow an authorised firm’s regulatory licence to conduct certain regulated activities. The host firm assumes most of the regulatory risk; they’re responsible for you and will monitor your business activities accordingly.
That’s not to say that regulatory hosting is immediate. The FCA has a backlog of approvals for these arrangements as well, and can take around two months to approve your use of a host. However, this remains a considerably quicker (and less labour-intensive) path to trading if that is your primary driver.
#3: An application for FCA authorisation takes more than just project management
If you’ve gone through the application process before and come out the other side, congratulations—you survived! Your personal experience will have depended on a variety of factors, including the type and complexity of your business and—perhaps more prominently—the handling of your application by the FCA.
It is vital to prepare a high-quality application, which means more than adding lots of detail. It’s about knowing when enough is enough, including the cautious use of industry terminology. Do not assume the person reviewing your application at the FCA has the same type or level of experience you have. You will benefit from using plain English and explaining things clearly.
Drafting an application involves input from several stakeholders and can take anywhere from 3 weeks to a couple of months. There are many templated forms and supporting documents that contribute to a robust application, so budget your time and resources accordingly.
#4: Keep a close eye on your permissions
The 2021 Financial Services Act allows the FCA to cancel or adjust your permissions more quickly if you’re not using them or if they aren’t a true reflection of your firm’s current or intended activities.
Applying for regulated activities (and by association, investment instruments) that you might not need will only add unnecessary complexity and time to your application, so think carefully when trying to future-proof your FCA permissions.
#5: Hybrid working arrangements—what is the FCA worried about?
We’ve probably all got used to a new normal, and some might still be trying to find the right balance. The FCA recently issued an article advising firms of the key factors to consdier when utilising a hybrid working environment. With the caveat that such arrangements will be considered on a case-by-case basis, the FCA emphasised that remote work is viewed as an extension of the office when performing any regulated activity.
Does this mean the FCA will appear unannounced at your front door while you’re in your pyjamas, sipping blearily at your second cup of coffee? Unlikely. The FCA has made firms aware of their reach, which will likely be sufficient to encourage firms to adopt sensible working practices.
That said, it’s well worth taking the FCA’s warning into account and shoring up needed security measures and other compliance best practices if hybrid working arrangements will remain a large part of your firm’s future.
Whether you’re running a new start-up or an established business, FCA authorisation can be tricky to navigate. Get in touch with our team today to learn how IQ-EQ can help you go to market faster.