Close Cooperation: FCA plans to offer more support for newly authorised firms

The FCA has recently set out its proposals for  Early and High Growth Oversight. This scheme is an acknowledgement that newly-authorised firms “can face challenges in meeting their regulatory obligations in the first few years after authorisation.” As such, following a successful pilot, the FCA is launching the Early and High Growth Oversight initiative to provide closer support for 300 newly authorised businesses by the end of 2023.

The initiative will offer:

  • enhanced supervision” over firms while they acclimatise to regulated status
  • support for firms in understanding their obligations so they can meet the FCA’s standards sooner
  • an opportunity for the FCA to identify and address harm developing in newly authorised firms quicker.

Firms will not need to apply to be part of the scheme – the FCA will contact firms directly upon inclusion.

Background

Per their recently-published Strategy for 2022 to 2025, the FCA are renewing their efforts to become a “more innovative, more assertive, more adaptive” regulator. This includes subjecting firms to a “stronger authorisations gateway” featuring increased scrutiny and higher standards for authorisation. The FCA is doing so in order to achieve its core goals of:

  • “Dealing with problem firms”
  • “Reducing harm from firm failure”
  • “Improving oversight of Appointed Representatives”, and
  • “Reducing and preventing financial crime”

These actions from the regulator are important measures to protect consumers and the UK market, but they mean that achieving authorisation can be very difficult for firms attempting to do so without external support. The Early Oversight initiative acknowledges this, and is being rolled out based on a pilot scheme which helped 32 newly-authorised firms to “improve their understanding” of regulatory requirements.

Common themes

Throughout the Early Oversight pilot, the FCA identified a number of common themes among newly authorised firms. These include (but are not limited to):

Regulatory submissions:

Regulated firms must complete and submit their regulatory data in a timely fashion.  They must re-submit their data if their original submissions are incorrect, “often taking up additional time and resource.” However, support from the FCA “led to timely and better quality regulatory submissions”.

Regulatory permissions:

The FCA found that “some firms hold permissions that they do not use, or that they may have applied for incorrectly.” By working with firms, the FCA  made sure that they held the correct permissions and fully used them. In one case the FCA took action to close down “a firm that was part of a wider organisation carrying out regulated activity without authorisation”. They also “worked with the firm to ensure that funds were returned to all customers.”

Considerations for firms seeking authorisation 

Based on findings from the pilot, the FCA has urged firms seeking authorisation to take note of the following insights:

  • Firms should read relevant FCA guidance for their sector or business and additional information (e.g. the FCA’s portfolio letters) “Before and during the authorisation process
  • The FCA recommends that firms register early for access to their systems and become familiar with their reporting schedule in order to “ensure you are ready to comply with and submit regulatory reports on time.”
  • Authorised firms should remember that they are “subject to the FCA’s rules and principles.” The FCA also expects open and transparent engagement from firms in the Early and High Growth Oversight initiative, and also to notify them promptly if it appears likely that you won’t be able to fulfil your regulatory obligations.

How Complyport can help

Complyport is a market leader in FCA authorisations, and we have successfully assisted in over 1000 applications. Over the last 20 years, we have provided guidance and advice on permissions required, outlined the amount of regulatory capital the new firm will need, and project-managed the building of the application pack.

Once a firm is successfully authorised, Complyport’s expert consultants assist firms in remaining compliant with regulation and advise them on how to meet and adapt to upcoming regulatory changes. We are currently providing regulatory support to over 600 regulated firms on an ongoing basis globally.

If this article has raised any questions, or you think your firm may require assistance, please contact Jonathan Greenstein via jonathan.greenstein@complyport.com to book in a free consultation.

About Complyport

Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.

We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.

Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.

Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.