UK FCA highlights good practices and areas for improvement in authorisation and registration applications

The UK Financial Conduct Authority (FCA) has published a new webpage highlighting good practices and areas of improvement it has observed in firm applications for authorisation and registration. These cover three key areas:

• Staff with the appropriate skills, experience and capacity to provide the relevant financial service. The FCA observed that some firms overly rely on compliance consultants and fail to show independent understanding of regulatory obligations. Others do not adequately explain how individuals with multiple roles will manage their responsibilities, and some lack sufficient evidence of UK-based operations or staff eligibility to work in the UK. Examples of good practice include firms submitting their own internal suitability assessments, identifying gaps in staff resources and clearly explaining how and when these should be addressed and providing clear ownership structure charts.
• Robust policies that document the firm's processes and procedures. The FCA noted that many firms prepare policies that are not aligned with their business model. This often results from using templated documents not designed for the specific firm. Firms also frequently fail to consider all customer scenarios when designing their systems and controls, particularly those in vulnerable circumstances who may not receive adequate support. Vague IT infrastructure plans were also flagged as requiring improvement. Examples of good practice identified by the FCA include firms that: used the FCA's sample business plan to ensure all key information was included; clearly explained how decisions are made in the UK, especially where operations are based overseas; provided detailed justifications for each regulatory permission applied for; and integrated Consumer Duty principles throughout their policies and procedures.
• Financial resources appropriate for the nature and scale of a firm's business. The FCA found some firms failed to submit historic financial accounts as part of their initial application, while others provided inaccurate or unsupported information. The FCA emphasises that firms should supply all the information the FCA needs. Examples of good practices identified by the FCA include firms that use the FCA's financial analysis templates, provide explanatory notes and assumptions and submit clear evidence of funding arrangements and contingency plans.

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