In the financial year ending March 2023, the FCA rejected 24% of applications for authorisation. To put that into context, that's almost 1 in every 4 applications. The previous year the FCA rejected 1 in 5 applications, and the year before that (2020/21) 1 in 14 applications.
Obtaining an FCA licence has never been a simple process, and nor should it be. There is a plethora of information, policies, processes etc which need to be taken into account. So much, that it can be quite common to trip up or miss something.
In the instance where the FCA doesn't feel your application is up to scratch, they may advise you to withdraw, this advice being accompanied by a wink and a nudge (if you don't withdraw, it's not going to be good....)
If you find yourself in the inconvenient position of having had to withdraw your application, your next thought will quite naturally be - What now?
The following are some key reasons the FCA advises applicant firms to withdraw their applications:
You are not ready, willing and organised
This is a catch all reason, and links heavily to the threshold conditions for authorisation - a set of high level minimum requirements for firms to be regulated set out by the FCA. Watch our YouTube video which covers the FCA's Threshold Conditions.
Any of the below could be considered examples of an applicant firm demonstrating that they are not ready, willing and organised to be regulated. If you were authorised "today" could you start business within 24 hours?
Key individuals not in place
Does your firm need an independent compliance officer? If so, they need to be on board and identified in the application from the start. Chief Technology officer? Same thing. MLRO? Same. If there are key individuals in the Director and senior management team who are not present at the time of submission - you shouldn't be submitting.
This means a greater investment in personnel, before you even have your licence, but, well - that's just the way it is.
Not enough experience in the management body
You might have a full Director / senior management team in place, but have you carried out a skills and knowledge GAP analysis? Have you got all the expertise you need to effectively manage a regulated firm with your business model? Is your leadership team heavy on young energetic entrepreneurs, and light on grey hairs with industry wisdom? Without carrying out a GAP analysis, how do you know what you don't know?
You don't understand the permissions you require in relation to your business model
In the world of financial regulation, there are a great many licensed permissions, exclusions, requirements, etc. You don't have to know about them all, but you do need to understand those which pertain to your business. You will be expected to be able to articulate this if the FCA calls in senior personnel for interviews - an increasingly frequent occurrence. You need to understand - with confidence - exactly how your business model will be using the permissions you are applying for. Moreover, if it turns out you haven't actually applied for the correct permissions either - you'll be advised to withdraw.
Policies and procedures not catered towards the firm
The FCA wants to see that the policies and procedures submitted by, and in place at the firm, are bespoke, and unmistakably specific to the nuances of your operations, personnel and business model. This is going to take time, and care, including contributions from all members of your team. The MLRO should be included in the drafting process of the AML risk assessment, policy, and procedure, the CTO in the drafting of the IT and data security policy, the CFO in the financial projections and calculations of regulatory capital etc. Being involved in this process also helps the team flesh out their understanding of their respective roles, equipping them well for an FCA interview if necessary.
If any of the above feels familiar, or indeed if the FCA hasn't been forthcoming about why they advise you to withdraw (also an increasingly common occurrence), go ahead and get in touch. We can help you with all of the above, and more! Simply fill in the contact form below.
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