FCA expands work with newly authorised firms
The Financial Conduct Authority (FCA) will be working with 300 newly authorised businesses through next year as part of its plans to provide “enhanced supervision” and more quickly identify any harm developing.
From October 2021 to March 2022, the City watchdog ran the pilot for Early and High Growth Oversight, working with 32 newly authorised firms across a range of sectors.
The goal of the programme is to spot harm or misconduct; raise standards; promote competition and improve firms’ experiences of working with the regulator.
“Following a successful pilot, we’re expanding Early and High Growth Oversight, providing closer support for 300 newly authorised businesses by the end of 2022/23,” the FCA said.
“Firms can face challenges in meeting their regulatory obligations in the first few years after authorisation.
“In response, we have initiated a new approach called Early and High Growth Oversight. This provides enhanced supervision for firms as they get used to their regulatory status and supports them to understand their obligations so they can meet the standards we expect as they grow. It will also ensure that we can identify and address harm developing in newly authorised firms quicker.”
It is understood that firms are selected from a range of sectors, based on a number of metrics and criteria. These are solo-regulated firms who may either have been authorised in the last six months, varied their permissions in the last six months or displayed indicators of high growth with a need for closer supervisory engagement. It is currently a random selection to grow the function to 300 firms.
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During the pilot, the regulator identified several common themes it can help new businesses with.
One of these areas is financial promotions.
“We worked with firms in our pilot to help them better understand our requirements on marketing and financial promotions and to adapt their promotions where they weren’t meeting them,” the FCA said. “Since then we have also provided webinar training to around 500 attendees.”
It also helped firms understand its requirements on regulatory data submissions, regulatory permissions and how to ensure they had appropriate business plans.
During the pilot, the FCA found that some firms hold permissions that they do not use or have applied for incorrectly. As a result, two firms cancelled their permissions and one firm was closed down as it was part of a wider organisation carried out regulated activity without authorisation.
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During the pilot, the regulator collected firm data on a monthly basis, but it is understood that it has now reduced this frequency in response to feedback from the pilot firms, which it considers to be proportionate to the potential risks.
The findings of the work will determine whether the FCA continues the programme after April 2023.