Case study – FCA authorisation application

Who can carry on regulated activities? Only firms that are authorised (or exempt from the need for authorisation) can carry on a regulated activity in the UK. This is known as the “general prohibition”. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have the power to authorise a firm to carry on regulated activities under Part 4A of the Financial Services and Markets Act 2000 (FSMA). How long does authorisation take? A firm will apply to the FCA, PRA or both (depending on the type of service provided and business conducted) for permissions depending on the type of regulated activities undertaken. Once an application is submitted it can take up to 6 months to obtain authorisation or up to 12 months if the application is incomplete. It is therefore important to submit a complete application to avoid unnecessary delays. What must be submitted? A firm preparing an application will be required to complete application forms and provide information and details which could include details about their group structure, board of directors, management structure, controllers, IT systems, and business continuity and disaster recovery plans for business and IT systems. Firms would also be required to produce a regulatory business plan containing certain information as set out in the FCA guidelines. In addition, firms would be required to have certain policies and procedures in place to ensure compliance and minimise risk to the business and harm to consumers. Case study – international firm in the insurance industry. In May 2024, Herrington Carmichael finished preparing an application for FCA authorisation for an overseas headquartered business that wanted to expand its business into the UK. This FCA application had a four-tiered approach. Firstly, we conducted an analysis of the activities to be undertaken by the firm to establish whether any of the activities would be classed as regulated activities, and if there were regulated activities, to determine which permissions the firm had to apply for to enable it to conduct its business. Secondly, we commenced compiling the information required to complete the application forms. This entailed having an information / documentation tracker system in place to ensure that the required application forms were complete at the time of submission and collating information received from the client into documents and application forms, ultimately collating the application pack for the client to submit to the FCA via Connect. In addition to the main application we advised on Senior Management Function (SMF) roles and associated documentation (including fit and proper checks, skills gap analyses and role descriptions), drafted and advised on the applicant firm’s regulatory business plan, and advised on capital adequacy requirements and outsourcing rules. Thirdly, in conjunction with the preparation of the application, we assisted the client by producing key documents and policies required to be in place or updated existing policies to “localise” them to comply with English law and meet the FCA requirements. For example, we drafted and advised on consumer duty policy and conflict policy and an FCA compliant outsourcing agreement. Lastly, we advised the client on ways to enable it to commence the regulated activities before becoming directly authorised by the FCA. This involved considering whether any exemptions applied and ultimately making a recommendation to become an appointed representative. We further assisted the client by identifying potential principals who had the necessary permissions required by our client, making introductions and negotiating the appointed representative agreement. How can we help? This case study only provides a simplified view of the complexities of preparing for an FCA application. Herrington Carmichael’s expert regulatory team have the skills and experience to assist you with your FCA projects across a wide range of sectors including insurance, payment services, IFA, wealth management and  funds.. If you are considering applying for FCA authorisation, please contact us to speak to a member of our Regulatory Team.