When to start thinking about FCA regulation

We’re all familiar with FCA regulation in some way or another, whether we know it or not. If you’ve ever taken out credit, applied for insurance, made investments or even if you just have a bank account, the organisation at the other end must be FCA regulated.

Who are the FCA and why do they exist?

The FCA is the Financial Conduct Authority, a regulatory body (independent of the government) formed in 2013 and with an annual budget in the region of £630m. Their primary role is the regulation of around 50,000 UK firms to ensure markets remain honest and fair, yet competitive.

Typically, when a business wants to engage in a certain activity that falls under the FCA’s jurisdiction, they must register or authorise with the FCA. During this process, these firms must demonstrate that they meet a range of requirements, standards and rules – not only at the point of authorisation, but forevermore.

The FCA not only protects the public from financial malpractice, but also works to guide regulated firms through the various requirements that they are obliged to follow. According to the FCA website, their three primary operation objectives are:

• To protect consumers from bad conduct
• To protect the integrity of the financial system
• To promote effective competition for consumers

Who must apply for FCA regulation and when?

FCA regulation doesn’t just apply to large banks and financial institutions. In fact, the list of firms that fall under the FCA umbrella is surprisingly broad, including:

• Banks, building societies and credit unions
• Claims management companies
• Consumer credit firms
• Electronic money and payment institutions
• Financial advisers and investment managers
• General insurers and insurance intermediaries
• Life insurers and pension providers
• Mortgage lenders and intermediaries
• Sole advisers and wealth managers

This is really just an intro article to the purpose and process around FCA regulation, so we don’t have the time to delve into the specifics of each sector, but it’s important to remember that regulation may need to happen a lot earlier than you’re expecting. For example, neobanks such as Starling and Monzo needed to seek FCA regulation before they’d even received a penny from customers.

The same applies to sole operatives such as independent wealth managers or financial advisers – you’ll need to apply for FCA regulation before you begin offering your services to customers.

Again, each area differs in terms of what’s required to apply for regulation. For instance, a wealth manager or financial adviser will typically need to hold an SPS statement, appropriate qualifications as well as understanding ethical requirements set out in APER (Approved Persons in Appointed Representatives). This is just one example of dozens of tailored requirements, so as you can imagine, application can be a fairly laborious and daunting process.

Help with becoming FCA regulated

Thankfully, we are here to help. No matter what area you fall under, our team of chartered accountants, tax specialists and all-round experts can support your business from inception and through the FCA application process by working closely with your compliance officer or firm. We will help you to collate the paperwork required for your FCA application process.

Mistakes can be costly (and can even cost you your authorisation) when you’re FCA regulated. But it’s important to remember that neither we nor the FCA want that to happen. The rules aren’t there to catch you out or to penalise you, but instead to protect the industry and consumers alike. Therefore, a good accountant who can partner with your compliance officer or firm is crucial when it comes to managing your regulatory approval and ongoing compliance.

We have expertise in the financial services industry providing a range of financial and business support services to clients including hedge funds, finance houses, brokerage and dealing firms, proprietary traders, insurance companies and wealth, investment and private equity management companies.

Our FCA compliance services cover accountancy, taxation, payroll and company secretarial. Our accountancy services integrate through bespoke templates which generate FCA compliance reports and RegData submissions.

And you never know, working with us on FCA regulation may also give us insight into other areas of your business where we can add value, such as tax, payroll, strategy, fundraising and even acquisitions. We offer a diverse range of accountancy services to SMEs of all kinds, so there’s very little that we haven’t seen or done in the last 15 years.

So if you’re an SME looking to offer financial services to customers, let’s talk. No matter where you are in your journey, you’re going to encounter FCA regulation at some point or another, so speak to one of our experts today and let’s figure out a strategic approach to this exciting step in your business’s growth.