How small businesses can become an FCA-authorised firm

The Financial Conduct Authority (FCA) requires any firms looking to participate in financial services to be authorised, which involves a series of processes to check that they are fit and responsible to carry out regulated business. Firms that trade without being authorised are doing so against the law and may be prosecuted by fines or imprisonment.

Being FCA authorised is required for the following:

• Consumer credit for both lenders and brokers that operate in store or online, including credit cards and all kinds of loans such as personal loans and payday loans
• Insurance products
• Payment services including non-bank credit card issuers and money transfers
• Electric money and e-money

Which professional service firms are excluded?

You can be excluded from authorisation if you are a credit institution, bank, building society, credit union or non-profit organisation. If you offer professional services as an accountant or lawyer and run regulated business beside your main service, you may also be exempt. See the list of exemptions here.

How much does it cost to become FCA authorised?

The cost of authorisation is based on the projected annual revenue for the company and its complexity. Complexity is based on several factors, including the number of controlled functions and responsibilities that the organisation has. For instance, a broker will likely be more straightforward than a company that deals with large insurance claims and gives advice.

Source: FCA Handbook

How long does it take to become authorised?

In the event that your application is processed as fast as possible, a credit broker can take six to seven months to be approved, compared to a lender or insurer which can take around 12 months.

The application process is highlighted below – it can take several months to gather the relevant information. Once submitted, the FCA will typically take around six months to review your application and give you a decision. You may be required to make further amendments in order to meet the criteria.

Whilst applications can be made by an individual applicant without professional help, the process of getting the relevant information together may be facilitated quicker with the help of a compliance professional.

The four-step process

• Step 1: Deciding which permissions and controlled functions you need to run your business activity. Choosing who will be the approved person for the license and creating a thorough business plan to include planned activities, risks, budget and resources.
• Step 2: Preparing your application – gathering all the relevant documentation required to submit your application. This includes a combination of your own accounts and FCA-specific forms.
• Step 3: Completing ‘controller’ forms which are specific to a type of business and their activity. There are controller forms for corporates, partnerships, individuals and trusts.
• Step 4: Submit your application to the FCA who, as mentioned, will take around six months to respond to you.

Read more at apply for authorisation.

Alternatives to authorisation

To avoid the administration involved with becoming fully FCA authorised, there are alternatives available to those looking to carry out related activity including becoming a trading style, appointed representative or introducer.

Although no formal authorisation is required, you will still need to uphold all the regulatory requirements as if you were fully authorised. If you partner with another authorised firm, it is their responsibility to ensure that you are trading in the most compliant way possible or they can face legal consequences.

Your business or website can become a trading style of an authorised firm. However, your business will still need to follow the industry guidelines as though you were authorised, including keeping within the price caps, providing warning messages in your marketing material and holding the relevant terms and conditions.

An appointed representative can be a company or individual that trades under an authorised firm’s umbrella. This allows the business to offer regulated activity with some exceptions; for example it cannot receive or store customer data.

Finally, firms or individuals can work as an ‘introducer’ and this is simply for referring business and leads, like a broker. This is most common for websites and the insurance industry but again, introducers cannot give advice, store data and must have relevant terms and conditions.