Many applications fail for reasons that are predictable and avoidable. The reasons for refusal are set out in detail on the FCA’s website for reasons for refusal and in outline here.
Weak Financial Resources Evidence
Supporting Financial Resources Evidence – The amount of capital that a firm needs to hold in order to carry on its business and to absorb losses is a key factor that the FCA will consider when assessing an application for authorisation. A simple estimate of the amount of capital required is unlikely to be sufficient. Instead, applications should be supported by audited accounts, a detailed financial projection and an explanation of how the required amount of capital has been calculated, such as by reference to the firm’s Regulatory Capital Requirement.
Copied Compliance Policies
Compliance policies copied from another business (even with minor amendments) can lead to a refusal. The compliance policies and procedures that you put in place must be tailored to your specific business and address the risks that your business really faces, not some hypothetical scenarios.
Fitness and Propriety Gaps
Examples of items that could prevent approval of an FCA authorisation application of directors and senior management include: un-disclosed county court judgements, un-explained employment gaps, incomplete regulatory histories.
An Unclear Business Model
A refusal will be issued by the FCA if the application contains insufficient detail on the business model to assess whether it is commercially viable and to generate income to sustain the proposed business. As stated in What the FCA requires from authorisation applicants, this needs to be a clear and specific description of the various income streams proposed to be generated by the firm and the customer base proposed to be serviced by the firm.
Poor AML Controls
Firms without a documented AML risk assessment; a nominated Money Laundering Reporting Officer; and adequate customer due diligence procedures will normally be refused authorisation.
Slow or Incomplete Requisition Responses
The key stages of the full process are set out at www.adempi.co.uk/fca-authorisation. When the FCA writes to you as part of your authorization process, it is vitally important that you treat each requisition as of the highest importance and respond to each point individually in full as soon as possible.
It is better to sort out these areas before submitting your application for FCA authorisation than to have your application refused and have to start again.