We receive regular requests from firms looking to obtain FSA authorisation. Not all these requests are from firms who are currently working under a network, we get several requests from new entries, either advisers looking to branch out and start a brokerage or people who haven’t been in the industry before. The individuals making the requests for FSA authorisation are often a little apprehensive on what’s involved and so we feel it a good opportunity to review this subject in more detail.
Obtaining authorisation may seem daunting and overly complicated but often when you break down the process things look more straightforward. We get asked the same sorts of questions such as: will my application be approved I have adverse history? I have no experience will I get accepted? What are the costs? How long will it take? What will I need to do once approved? And general fears of the FSA and being directly authorised.
Some of these questions can be easily answered; some are specific to the individual. I have summarised some of the main requirements below, if you require more detail then we have put together a more in-depth guide which we’ve tried to keep jargon free, available here. If you are still unsure on any points please contact us.
Requirements
The FSA have set benchmarks, and principles which an individual has to be seen to meet to obtain authorisation. These are known as “threshold conditions” and being deemed “fit and proper”. You or the firm must have adequate resources in regard to finance, management, staff, and systems and controls. You must also be deemed fit and proper in order to carry out a controlled function such as being honest, have integrity and reputation, competence and capability and financial soundness.
If you do have adverse history this does not necessarily mean you will not be accepted, we have successfully managed to get such individuals approved. The FSA will expect anyone performing a controlled function to be able to demonstrate the skills and experience they have, so if you are completely new to the industry with no experience whatsoever then getting approved will be difficult. Each individual set of circumstances is different and if you are unsure then please get in touch with us.
1. You will need to be able to demonstrate you meet the threshold conditions and be deemed fit and proper.
2. You will need to demonstrate capital adequacy, for most firms this will be £5000 or 2.5% of regulated income whichever is greater but for firms looking to hold client money this rises to £10,000 or 5% of regulated income whichever is higher. For more details on the costs involved in obtaining and holding authorisation see our more detailed guide here.
3. You will need to obtain PI insurance; the cost can depend on types of business conducted, historic claims history and size of business/turnover. Typically a small mortgage and insurance broker with clean history would be paying in the region of £700.
4. You will have to demonstrate on the application and within supporting documents that you have the financial resources to maintain the business, can run and maintain a compliant business through appropriate oversight and controls and understand what is expected of you from the FSA.
5. Some of the supporting documents that will be expected are: a business plan, opening and closing balance sheets, twelve months cash flow and profit and loss forecasts, compliance monitoring program.
If you are reading these thinking it sounds impossible then you can always opt to have H3 support you through an application, we have template documents which make the process easier.
Process
I have broken and simplified the process down; if you have requested H3 support then we take care of the process for you.
1. Check you understand and meet the criteria, often this is a little grey (as are many rules with the FSA!).
2. Download the relevant application forms from the FSA “build my application page” http://www.fsa.gov.uk/pages/Doing/How/application/form.shtml
3. Complete the FSA application – can be done on the computer and printed only when finished for signatures if applicable. Gather the required supporting documents needed including all the accounting information requested. (Help documents are available with the application forms if needed).
4. Print, sign and post (recorded) the application and supporting documents to the FSA with your application fee of £1500.
5. Usually within a fortnight you will receive correspondence from the FSA telling you who your case manager at the FSA is. It is this person who will check through your application and who you will liaise with.
6. Often additional information is requested, more detail, explanations for what you’ve written etc. You should respond as quickly as possible to any requests for information to prevent delays.
7. The FSA will request references from previous employer, network under or previously under.
8. The completion time differs widely, if you are slow to respond to questions, if they have issues in obtaining references then the application can be delayed and so a little unknown. For a complete application you should allow five months. A few years a go we used to see quick turn around times of less than 4 months by the FSA, but recently this has slowed and five to six months is not uncommon.
9. The FSA will write to you to confirm approval (or explain why they have declined and give you the opportunity to appeal). We often get asked can you guarantee my application will get approved? It is impossible for any firm to offer a guarantee when the decision maker is not themselves. A number of factors can cause a case to be declined either issues known upfront or problems encountered during referencing. What we can do is review your situation before you make an application and give our honest opinion if we see any potential issues which could cause an application to be declined.
10. Authorisation (happy days!) you can now get on with running your business, free from the restrictions of a network, retain all your income and make your own decisions. You can do all this by yourself or take external compliance support, we offer fully flexible, great value, contract free support and would be happy to help.
If you are at any time unsure if going directly authorised is right for you or unsure on what’s expected from you then please get in touch and we would be happy to discuss your options before you commit to any application or paid support.