FCA highlights common failings in asset management applications

The FCA has provided a list of common errors asset managers are making in applications for authorisation. For context, in the year to 1 April 2024, 18% of applications were withdrawn as a result of the FCA’s concerns.  Of the 310 applications it determined, just over half were determined in under 6 months, and nearly three quarters within 8 months. Even when concerns did not lead to the applicant withdrawing the application, they often led to delays and a longer time between application and approval.

Key areas the FCA highlighted are:

  • proposed senior management who have not held role that require similar prior experience or who don’t have suitable qualifications. The FCA has found that applicants have not been able to explain to the FCA’s satisfaction how their business will work and the regulatory requirements that will apply to it;
  • firms not understanding that the FCA expects the mind and management of a firm to be in the UK on a day-to-day basis and that it is not enough to have compliance and administration in the UK with those who make business decisions just flying in from time to time;
  • firms failing to identify the risks their business model poses and how they might remove or mitigate those risks;
  • firms not considering their responsibilities for activities they outsource and the impact on their business of the outsourcing;
  • firms failing to consider potential conflicts between the interests of the client, the firm and related parties, adequately or sometimes at all;
  • firms seeming to structure business in ways that will avoid needing to comply with onerous but appropriate requirements, and seeking exemptions from FOS and FSCS scope when this is not appropriate; and
  • firms who are not “ready, willing and organised” to start their business – for instance, they have not recruited SMF holders or arranged for sufficient capital to be put in place.

Emma Radmore