3 next steps for newly FCA authorised firms

3 next steps for newly FCA authorised firms

Congratulations on becoming an FCA authorised firm! So, what happens next?

As a financial services firm, gaining FCA authorisation was probably one of the most important and significant endeavours your business has undertaken recently. Now that you have completed the journey to authorisation, it is important to consider the next steps.

As an FCA authorised firm, you are required to establish, implement and maintain adequate policies and procedures, monitoring programs, governance and risk frameworks, and systems and controls so that you can meet your regulatory obligations under FCA rules and requirements. This obligation affects your firm’s managers and employees, as well as any appointed representatives and/or tied agents you may have.

The continuing impact of COVID-19 and the macroeconomic pressures on consumers continue to pose challenges to firms, such as how to stay on top of the changing regulations and requirements, and ensuring regulatory compliance still in place.

Ensuring effective and adequate regulatory compliance as a newly regulated firm

You will need a strong compliance function to maintain and monitor the adequacy and effectiveness of your compliance controls. That function will also be responsible for the compliance of staff with the applicable systems and controls, conduct of business and prudential rules.  It should also be able to ensure that the business is able to adapt to regulatory change.

These are critical responsibilities which can be onerous, especially if yours is a new business facing the many other challenges often faced by new businesses, including limited resources, whilst the business develops and achieves commercial success. The question is how best to meet those responsibilities?

Three key elements of effective regulatory compliance:

1. Design and Embed your Compliance Framework

You will need a regulatory compliance framework that includes a mapping of your regulatory requirements to the respective  processes and controls that ensure compliance. You should also establish compliance  policies and processes, monitoring programmes, manuals and training programmes. Establishing the right regulatory framework with all the appropriate and up to date elements is one of the most important tasks you face as a newly authorised FCA firm. You must get it right.

2. Review, review, review

You will need to regularly review and update your regulatory compliance framework. You will need to implement the compliance monitoring programme to check that your policies and processes are working as intended and you will need to constantly check and review the impact of changes in the regulations and assess the impact on your business.

3. Timely and accurate data and reporting

You will need to be sure you are capturing, collating and reporting the right data for the right reports, and building this into routine business reporting so that it is done efficiently, effectively and with the appropriate MI for your Senior Management.

You will be required to report both financial and non-financial data to the FCA. These will need to be submitted on time and in line with the regulatory guidance. Depending on your firm’s permissions, the financial data reports may be linked to in-house capital adequacy assessments which also need to be in line with the technical rules and guidance.

Considering the scale and complexity of the obligations firms have to comply on an ongoing basis with their regulatory obligations, it is not surprising that some firms consider whether the engagement of a third party advisor could help.

Choosing the right approach to compliance: in-house, outsourced or a mix of the two?

Your desired model may be to deliver all of this using in-house resources only. This may be seen as the preferred route due to concerns that external advisers might not fully understand your business model and may be unable to fully integrate and apply the rules as specifically applicable to your business.

However, there are some distinct benefits an outsourced or co-sourced service provider can bring to your business. The first issue is one of knowledge; the regulatory environment for financial services is very complex and changes regularly. It can be difficult to find and recruit all the right people with the right depth of knowledge and capacity to track all the regulatory changes that are constantly produced by the regulators.

The second issue is one of cost/benefit. Regulatory compliance is a cost to your business and you should look to minimise your costs while maintaining quality. For smaller and newly authorised financial services businesses, it may simply not be affordable or economical to have a fully-fledged compliance function in-house.

It is important to note that your approach to regulatory compliance will need to change as your circumstances, and regulatory requirements do. For some firms, a blend of in-house and consultancy resource and expertise may prove to be a more effective solution than an all in-house or completely outsourced model. 

Flexible solution tailored to your unique compliance needs

Recently authorised firms have a number of issues to grapple with as they step into the world of regulation. As firms move from authorisation to being supervised by the FCA, having a robust compliance framework will ensure they don’t fall foul of the rules or breach any of their threshold conditions. Exactly how firms build and maintain that framework will depend on their unique circumstances.

Our experience working with newly authorised FCA businesses is that even strong, internal compliance teams need some level of tailored support to enable the organisations navigate their compliance obligations.

In a post COVID-19 world, and with the macroeconomic pressures facing firms and clients, a robust compliance infrastructure is indispensable to staying on the regulators right side. We are able to tailor the support we provide according to the needs of your firm.
 

Help with your regulatory compliance

Our financial sector specialist team can provide a range of compliance monitoring, other regulatory support services to help you meet your regulatory obligations.

Whatever your firm’s size, we focus on providing practical solutions and our involvement will be bespoke to your needs, ranging from an ad hoc only arrangement to a fully outsourced model.  

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For help and advice on your regulatory compliance requirements, please contact Richard Barnwell or get in touch with our Financial Services Advisory team.