The UK has long been a leader in the world of financial services, being the seventh largest in the OECD in 2018. With a growing number of start-ups and small businesses getting involved in financial services, there’s also an increasing need for clear regulation and good governance.

Do we need the Financial Conduct Authority?

Until the coronavirus crisis hit, UK financial services, banking and fintech had been booming. This boom led to many new businesses being set up, and more tech companies getting involved in the fintech, digital banking, cloud accounting and online payment sectors.

However, any sector dealing in financial data, transactions and assets has an inherent risk level, and therefore the Financial Conduct Authority (FCA) was originally created. The FCA works in the financial arena, regulating any business or organisation that deals with people’s money, assets or financial data, ensuring that there is protection for their clients and customers, and everything is done in an honest and fair way.

There are lots of different levels to the UK financial services sector, from independent financial advisers (IFAs) giving personal financial advice, to software companies providing online payment gateways and large investment companies dealing with millions of pounds in assets.

These different types of financial businesses all have their own specific regulatory requirements. The key role of the FCA is to provide the regulatory framework. 

Your FCA responsibilities and how best to meet them

If your business does meet the criteria, it’s leadership’s responsibility to take the correct steps to become FCA registered and comply with all the relevant reporting. Within your organisation, you must have approved person(s) who are responsible for your FCA requirements, actions, and key decision-making.

They must be deemed as ‘fit and proper’ and will be background checked. This is logged by the FCA, and you will be checked to ensure you can carry out what are referred to as ‘controlled functions’. The FCA will need to understand fully your business’ purpose and how it intends to make money. Robust cash flows and detailed systems and controls will need to be in place and reviewed by the FCA for them to determine whether the business appears viable and well managed.

The FCA will check that the business meets the minimum ‘threshold conditions’ before deciding to approve any application. The timelines for applying to the FCA and becoming registered are set out by the FCA. It’s not a speedy process and, depending on the level or authorisation you require, the whole procedure will take 6-12 months.

As such, you need to think about getting the timescales right and having everything in place as early as possible. Having advisers such as SimplyBiz to assist with your FCA registration can help immeasurably with the application process, reducing the complexity and providing support where needed.

Keeping on top of your FCA requirements

Responsibility for your FCA filing and reporting sits with the company, not an adviser. You need to be on top of your governance and compliance – although you can have advisers on hand to help and support you, again something SimplyBiz can assist with.

It’s also worth remembering that for some investment businesses it’s not just the financials that will be reported to and reviewed by the FCA, it’s also the weighted exposure risk of your equity, liabilities and assets to ensure you meet the capital requirements.

The level of the capital base, the availability of the capital base, liquidity management and the effectiveness of your internal and corporate governance will all be examined to some degree. It’s all about protecting any client assets etc. you should (or shouldn’t!) be managing and to make sure there are adequate funds and safeguards in place if the worst should happen.

The financial crisis was a catalyst for this high level of regulation. The then Financial Services Authority (FSA) was disbanded following the disastrous outcomes of the banking crisis, and the Financial Services Act 2012 created both the FCA and the PRA in 2013.

The finance arena is going to be squeezed hard over the coming months and years. Being on top of your risk management and reporting will be vital. 

Helping you stay in control of your FCA responsibilities

We have a wealth of experience providing support for FCA regulated firms and the filing of their RegData returns.

MyRegData is a cloud-based application that will record financial and other information required for your RegData return. Twice per year we will have a discussion with you to review your data and ensure everything is present before filing, so that it files successfully.

After a few months of use of MyRegData, you will wonder how you did without it.

Call us on 0161 413 5070 or email info@myregdata.co.uk to arrange an overview of the software and discuss next steps.