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Article:

3 next steps for newly FCA authorised firms

28 August 2020

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 areas of focus for your business 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 tied agents you may have.

The current COVID-19 crisis has brought us all a number of challenges, including how to stay on top of the changing regulations and requirements, and how to ensure regulatory compliance with the current restrictions still in place.

You will need strong finance and compliance functions to maintain and monitor the adequacy and effectiveness of your compliance controls. That function will also be responsible for the compliance of staff as they conduct business, as well as for oversight of capital adequacy and potentially client money. 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?

3 key elements of effective regulatory compliance:

Regulatory framework, policies and procedure

You will need a regulatory compliance framework including: a mapping of your regulatory requirements, obligations and controls, your 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.

Review, review, review

You will need to regularly review and update your regulatory compliance framework. You will need to design and implement a 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.

Efficient 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.  Upon granting your permissions, the FCA will have reviewed your business plan to better understand your firm.  Depending on your firm’s permissions, going forward their first port of call beyond your routine reporting may be your ICAAP; this is an essential document that underpins all aspects of risk and capital management within the business.

How can we help?

Your ambition may be to deliver all of this using only in-house resources. For something as important, complex and regularly changing as regulatory compliance, you may feel that this is your preferred route and the right approach, and that using external advisers might be problematic as they need to understand not just the regulations, but also how your business works and how the two will interact.

However, it is worth considering the advantages of outsourcing and tapping into the expertise of advisors who understand the regulatory environment you’re facing. 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 to provide a complete compliance function.

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. 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. 

Our Services

Our Retained Services team can provide a range of compliance monitoring, regulatory services and review services to help you meeting your regulatory obligations.

Whatever your firm’s size, we focus on providing practical solutions and our involvement will be bespoke to your needs – our support can be as little or as much as your needs dictate.  On a regular basis, we will provide you with a pre-determined level of support, for a monthly fee, to meet your ongoing compliance requirements.  We also facilitate pay-as-you-go services, so you can contact us when you need assistance with a set project or piece of work, or an ad hoc query.

We tailor our services to your business and the market you operate in, your regulatory permissions, and your business structure and culture, and can offer any combination of the following services at a frequency to match your regulatory deadlines and needs:

  • Drafting & maintaining your Compliance Monitoring Programme or supporting your in-house compliance team
  • Drafting or reviewing your Compliance Manual and supporting policies & procedures
  • Regular on-site reviews
  • Annual refresher training
  • Regulatory Healthchecks
  • Ongoing compliance support, by telephone or email, for any compliance related issue or query
  • Assistance with regulatory reporting and notifications
  • Horizon scanning and regulatory briefings

Conclusion

As a newly FCA-authorised firm, you are entering a complex and demanding regulatory climate. You will need to set up a framework that manages your risks and your compliance. Exactly how you build and maintain that framework will depend on your unique circumstances.

Our experience of helping newly authorised FCA businesses is that even a strong, internal compliance team needs support and advice at some point. The best advice and support is flexible and focused on meeting the specific regulatory challenges a business faces at any given moment, from designing an effective framework early on to horizon scanning to ensuring that any regulatory changes are carefully managed.

The current working restrictions brought about by the COVID-19 outbreak will also create further challenges around how any outsourced or co-sourced compliance resource can be provided - our team can work effectively at a distance using our secure document portals and our in-house monitoring software.

If you have any questions, do get in touch, and we would be happy to have a conversation.

Download our Retained services offering brochure, Rhiza brochure and Business Services & Outsourcing for Financial Services brochure below.

RETAINED SERVICES OFFERING BROCHURE

RHIZA BROCHURE

Outsourcing for FS firms