Compliance with regulatory standards is a key legal requirement for financial services businesses. In the UK, as part of the Financial Conduct Authority’s (FCA) regulation of financial services firms, it mandates that firms submit a ‘regulatory business plan’ when seeking authorisation from the FCA. The regulatory business plan is not a mere formality. It demands an in-depth analysis of business activities and risks. Here is some information about FCA regulatory business plans.
Regulatory Obligation
Under the Financial Services and Markets Act 2000 (FSMA), the FCA has been granted significant powers to regulate and supervise financial firms operating in the UK. Among these powers is the requirement for firms to submit a regulatory business plan when seeking FCA authorisation.
Contents of the Regulatory Business Plan and key points
The FCA provides guidelines on what should be included in a regulatory business plan. Whilst the exact requirements will vary depending on the nature of the business, key components may encompass:
- relevant background regarding the applicant such as its legal structure
- what the applicant is intending to do and its objectives, and its experience in a regulated activity
- long-term plans
- information on the target customers and market
- information about the customer experience
- details about any investment strategies, fee and remuneration policies, governance framework and key personnel
- experience of the individuals who will be performing controlled or senior management functions
- financial projections
- any key dependencies and business risks
- marketing strategy
- any outsourcing plans
- analysis of key conduct risks
This is not an exhaustive list but gives a steer on the breadth and detail that the FCA requires.
Being specific to your firm
The FCA wants firms to follow their guidance on regulatory business plans, but there may be additional information that needs to be considered based on what the firm is doing and the permissions / consents they are applying for. It is important that the regulatory business plan reflects and is directly relevant to what the relevant firm does (or will do) in practice.
Regulatory review and updates
FCA regulatory business plans are not static documents and once they have been prepared it doesn’t mean that the obligation to keep one is satisfied. They should undergo regular reviews and updates to reflect any changes in the firm’s strategy, risk profile, or regulatory landscape. For example, many authorised firms may need to update their regulatory business plan following the introduction of Consumer Duty this year, which were new rules that set a higher standard of consumer protection in financial services.
What to take away?
Financial services firms should approach regulatory business plans with diligence and adhere to the FCA’s guidelines. Regulatory business plans should be reviewed and updated periodically to reflect changes in the business and the surrounding regulatory and commercial landscape. They are an important planning and risk mitigation tool.
For expert legal advice on Regulatory Business Plans or financial services law matters generally, please contact us to speak to a member of our Commercial Team.
