Obtaining authorisation from the Financial Conduct Authority (“FCA”) is a significant milestone for any financial services firm operating in the UK. However, authorisation is not the end of the regulatory journey. Firms must continuously comply with ongoing obligations to operate within the regulatory framework and maintain their authorisation status. These obligations are designed to protect consumers, maintain market integrity and promote fair competition.
Key Ongoing Obligations
Compliance with the FCA Handbook
The FCA Handbook is a comprehensive set of legislative rules and guidance that authorised firms must follow under the Financial Services and Markets Act 2000, as amended (“FSMA”). It is crucial for authorised firms to abide by these rules not only for regulatory compliance, but also risk management, operational efficiency and maintaining reputation and trust with clients, investors and stakeholders.
Although there are specific requirements based on firm type, the key sections relevant to all authorised firms with ongoing obligations are:
- Principles for Businesses (“PRIN”): These are the 12 fundamental high-level principles and obligations that firms must adhere to, such as conducting business with integrity (Principle 1), observing market conduct (Principle 5), treating customers fairly (Principle 6) and Consumer Duty (Principle 12).
- Senior Management Arrangements, Systems and Controls (“SYSC”): Firms must establish and maintain effective systems and controls, and policies and procedures to manage and mitigate risks, including those related to financial crime and anti-money laundering. This framework is essential to ensure that firms operate effectively, in line with regulatory requirements, and in the best interests of their clients.
Furthermore, firms must continuously meet their FCA Threshold Conditions (“COND”) to maintain their FCA authorisation, which among other requirements, include having a UK-registered office, adequate financial and operational resources, qualified and suitable personnel and a business model aligned with regulatory expectations.
Reporting Obligations
Authorised firms are required to submit regular reports/information to the FCA such as their annual report and management accounts, together with an array of other financial and/or governance reports based on each firm’s specific regulated activities. These reports help the FCA monitor the firm’s compliance with regulatory requirements and assess its financial health. In addition, the information provided helps the Regulator understand how each firm identifies, assesses, monitors and manages risks related to their business activities.
A Firm Details Attestation (“FDA”) is required annually for authorised firms, to confirm or update any changes to the firm’s details, principal place of business, FCA-approved persons’ details, complaint persons’ contact details, amongst others. These obligations must be completed through the FCA’s RegData platform and must be submitted within 60 working days of the financial year end to avoid late fees.
Firms falling under scope of transaction reporting requirements, must, under UK Markets in Financial Instruments Regulation (“MiFIR”), report details of transactions in financial instruments to the FCA. Accurate and timely reporting is imperative to help detect and prevent market abuse, ensuring transparency and integrity in the financial markets.
Senior Managers and Certification Regime (“SMCR”)
With the aim to enhance accountability and improve governance, the SMCR requires firms to allocate specific responsibilities to Senior Managers and ensure that individuals in key roles are fit and proper to carry out their roles. Approval is required before the individual can start performing their role and duties, and once appointed, they are subject to a “Duty of Responsibility”, which can hold them accountable if they fail to comply with the regulatory requirements.
Consumer Protection and Market Conduct
Firms must ensure that their business practices align with consumer protection standards and market conduct rules including adhering to the FCA’s Principle 12 for Consumer Duty and Treating Customers Fairly (“TCF”) framework. These regulatory frameworks are designed so financial services firms act in the best interests of consumers, and maintain fair, transparent, and not misleading market practices.
Sanctions
Failure to comply with the FCA’s rules can result in financial penalties, public censures and suspension of authorisation. In 2023, the FCA issued a total of £53,354,600 for breaches of their rules. These sanctions are part of the FCA’s broader enforcement strategy to ensure firms remain compliant to regulatory standards and protect consumers and maintain market integrity. The FCA’s approach is risk-based, considering the potential harm to consumers and markets when deciding on the appropriate sanction.
Firms authorised by the FCA must navigate a complex landscape of ongoing obligations to maintain their authorisation status and operate effectively within the UK financial services market. By adhering to the FCA Handbook, fulfilling reporting obligations and maintaining robust systems and controls, firms can ensure compliance and contribute to a fair and transparent financial system.
How Can Complyport Help?
As experienced regulatory consultants, Complyport can assist firms in understanding their ongoing obligations post-authorisation, and how we can offer support to remain compliant with them. We offer tailored support to ensure firms navigate the complexities of the regulatory environment.
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