FCA Authorisation & Variation of Permissions – Work with Grath to accelerate your regulatory applications 👌

Firms and individuals must be authorised by the FCA in order to perform regulated financial service activities and ensure compliance with the FCA’s principles, rules, and guidance relating to such services.

As defined in the Financial Services & Markets Act (FSMA) 2000, Part 4A permissions are granted by the FCA or PRA, with any variations of permission defined by Threshold Conditions, which must be met at authorisation of the activity and on an ongoing basis.

Key Points:

• A firm’s permission is essentially made up of a number of Regulated Activities, but can also be frequently restricted in some way.
• Permissions are set out on the Financial Services Register and are therefore published.
• Regulated Activities generally do not overlap; therefore, it should never be assumed that one Regulated Activity includes any other.
• Regulated Activity for which a firm does not hold permission, may not be carried out by that firm unless it obtains additional permission.
• Firms can apply to the FCA to request changes to their Permission (additions or removals), and this typically arises when a firm has determined that it needs to make changes to its services/business model and may be accompanied by audit oversight.

Within the remit of FSMA 2000, authorised persons may apply to vary or cancel Part4A permissions to;

1. Allow it to carry on further regulated activities, other than a PRA-regulated activity; or
2. Reduce the number of regulated activitiesit is permitted to carry on; or

vary the description of its regulated activities (including by the removal or variation of any limitations).

Submitting a new application or requesting a variation/cancellation of permissions is undertaken in consultation with the regulators, using their defined process. This can be an arduous and prolonged process, requiring significant evidence and documentation to gain the outcome needed to conduct business in the UK financial services sector.  The regulators provide guidance to outline the approach, requirements and expectations for such applications. It is critical that they can be confident in the firm’s ability to perform the duties to the obligation standard, and provide protection to customers and the industry, in doing so professionally and to the expectations of the regulator throughout.

The regulator may ask for auditor reports, key stakeholder discussions/evidence, and a statement from the firms governing body throughout the application consideration process.

Prior to submission, firms should agree their approach to an application or any such changes arising from a variation of permission at a senior management level. Firms must ensure all governance steps have been adhered to and such changes are consistent with its strategic objectives.  Firms must be able to demonstrate business readiness in anticipation of the application being successful and avoid too much reactive building to support their permission capability. This can indicate unpreparedness and weakness in the organisational arrangements. Firms must demonstrate its operational readiness and articulate how business model changes will be planned and managed.

Firms should ensure they have robust governance and oversight; strong risk management & capital adequacy, robust senior management and compliance arrangements and demonstrable operating & control capabilities – all aligned to the firms’ regulatory obligations and evident throughout the process.

A clear and actionable plan fosters regulatory confidence from the start and ensures the firm’s regulated activities are performed under robust governance and with clarity of oversight.

Key to the final decision, is that firms can demonstrate its ability to mitigate risk of harm to the markets, consumers and the industry as a whole in granting or removal of permissions in an orderly and controlled way.

The FCA website has an information page that sets out the requirements for the application process which can be found here: https://www.fca.org.uk/firms/authorisation

An ability to articulate a firm’s regulatory obligations and demonstrating the initiative to understanding those regulatory obligations helps to ensure regulator confidence, with satisfying threshold conditions. Organising your firm’s activity into what you can demonstrate immediately and what you clearly understand is required, but that you know will be delivered (ahead of permissions) will help the regulator to assess your firm’s model, capabilities and comprehension to carry out the activity if permissions are granted.

Grath has seen the benefits of using its regulatory compliance software as customers navigate the regulatory application process to evidence your regulatory obligations and demonstrate a commitment to the regulator in using technology to drive efficiency, reduce administration and achieve valuable scale to strengthen compliance and risk mitigation and activity.

When collaborating closely with its customers, Grath is also aware that that firms have cost constraints and this is felt acutely where businesses are not yet live and in pre-authorisation stage. Grath understands that when revenue has yet to be generated, it can be challenging to justify spend ahead of permissions being granted.

However, being prepared and being able to demonstrate business readiness and control across the firm should not be underestimated and how valuable an asset that can be in the authorisation process. Having the Grath environment and automation in place can rapidly add a dimension to your capabilities and help with the regulator confidence associated.

Speak to Grath

To support firms throughout the authorisation process, Grath has a solution that enables you to get on the front foot when progressing through permission application. Why not speak to us to find out more on exactly how we can help you to prove adequate organisational arrangements and compliance to your regulatory obligations in a cost effective and controlled deployment with support from a highly experienced team of peers.

Get in touch with us at grath.com/contact