Obtaining authorisation from the Financial Conduct Authority (FCA) can be a crucial step in the life of your financial services business. But what happens if your initial application for FCA authorisation has been unsuccessful, and what can you do about it? Read this essential guide for helpful tips on how to deal with a disappointing application outcome.
If you need further support, our financial services solicitors are on hand to assist with all aspects of your journey to FCA authorisation, including preparing or updating your application and overcoming any problems which may arise.
Contents:
- Why is FCA authorisation important?
- Are FCA authorisation applications often unsuccessful?
- What are the main reasons why FCA authorisation applications fail?
- What should I do if my application was rejected for being incomplete?
- What should I do if the FCA has requested further information from me about my application?
- What should I do if the FCA is minded to refuse my authorisation application?
- What should I do if my authorisation application has been formally refused?
- Seeking legal guidance
Why is FCA authorisation important?
Your business is prohibited from undertaking certain financial services in the UK unless it has authorisation to do so from the FCA (or can rely on an exclusion or is exempt). Activities which are restricted in this way are referred to as ‘regulated activities’. Carrying out regulated activities without authorisation where required is a criminal offence and could have serious consequences for you and your business.
So, if your business model involves carrying out a regulated activity, obtaining FCA authorisation may be essential. You can find out more about authorisation and regulated activities in our Knowledge Hub article ‘FCA authorisation: Does your firm need it and what’s involved?’.
Are FCA authorisation applications often unsuccessful?
Unfortunately, yes. Recently, the FCA has adopted a policy of more rigorous scrutiny for new firms applying to enter the authorisation ‘gateway’ to UK-regulated financial services. The FCA is also less open to ‘holding the hands’ of businesses to help them improve deficient applications. According to the FCA’s data, 1 in 5 applications for authorisation were unsuccessful in 2022/3, up from 1 in 14 in 2021/2.
If your initial application is unsuccessful, don’t be discouraged. While it’s frustrating to experience delays in your business plans, there are specific steps you can take to improve the chances of a revised application being approved.
What are the main reasons why FCA authorisation applications fail?
Key reasons why your application to the FCA for authorisation might not have succeeded include:
- Incomplete application: your initial application did not contain all the required information, or you failed to pay the application fee.
- Failure to appropriately respond to FCA follow-up information requests: following your initial application, you did not provide supplementary information requested by the FCA promptly or in full.
- Failure to meet FCA expectations: you have not demonstrated to the FCA (through your application and any further information provided) that you have a suitable business model and that your business is ready from day one for the responsibilities which come with being regulated.
What should I do if my application was rejected for being incomplete?
If the FCA reviews your application and finds it incomplete, it will reject the application without assessing it and your application fee will be refunded.
Common omissions from incomplete applications include:
- incomplete, missing or unsigned forms;
- passwords not being provided for protected document files;
- key internal positions still being unfilled (such as your compliance officer);
- submission of incomplete, or insufficiently granular, financial information;
- generic, off-the-shelf business plans which do not reflect your business’ specific circumstances; and
- indications that the technology or systems you'll be using to carry out the applied-for regulated activities aren’t ready.
If the FCA tells you that your application is incomplete but you’re unsure why, request feedback and review the guidance on the FCA website. You can find detailed information specific to your type of firm on the FCA’s authorisation home page or contact their call centre for specific queries.
An essential requirement for authorisation is thorough preparation. This means carefully reading their guidance and taking legal or other professional advice as needed. Our financial services team at Harper James has extensive experience with FCA applications and can assist you in preparing a comprehensive submission.
Be aware that the FCA’s review period for new applications only begins once they receive a complete application. Submitting an incomplete application can significantly delay the process, as it will require resubmission.
What should I do if the FCA has requested further information from me about my application?
Even if your initial application contains all required information and you have paid the fee, the FCA often won’t approve applications immediately. They may need to clarify details or ask follow-up questions. An FCA case officer will be assigned to assess your application further.
You should not submit a weak initial application with a view to improving it later based on the FCA’s feedback. This may result in your application being rejected as incomplete and negatively impact the FCA’s view of your business’ preparedness.
Respond promptly and thoroughly to any questions from your case officer, ensuring all their questions are answered by the deadline. Always confirm with your case officer that they have all the information they need to avoid delays or misunderstandings.
If the FCA asks about sensitive issues, address these directly. It’s best to meet any weaknesses in your application head on, outlining your plans to manage these weaknesses. Legal advice can be helpful in considering how to disclose sensitive matters to the FCA.
Your co-operation during the application process influences the FCA’s authorisation decision. Ensure that you and your team are ready to deal promptly with queries. The FCA values openness and honesty in all dealings.
If you need more time to gather the information or revise your plans in response to feedback, you can withdraw your application and reapply later. However, remember that you will lose the initial fee you’ve paid and will have to pay this again if you re-apply.
What should I do if the FCA is minded to refuse my authorisation application?
If the FCA is considering refusing your application due to unresolved concerns, they will typically suggest that you withdraw and reassess your submission. Your fee will not be refunded.
The FCA’s concerns will be specific to your firm and its proposed business model. To be authorised, your business must meet ‘threshold conditions’ which include having adequate financial and non-financial resources, a viable business model, meeting the ‘location of offices requirement’, being ‘capable of being effectively supervised’ and suitability for regulation. You must also demonstrate compliance with the FCA Principles for Business from day one.
If you withdraw your application, thoroughly review the feedback from your FCA case officer before deciding how to proceed. You may find it useful to take targeted legal advice on how specific deficiencies in your application could be remedied.
What should I do if my authorisation application has been formally refused?
If you choose not to withdraw an unsatisfactory application, the FCA can formally decline it and your fee will not be refunded.
To ensure fairness, the FCA will issue a warning notice, allowing you to present your case. The FCA will then review its decision and, if it decides to proceed with the refusal, will issue a final notice.
If you disagree with the refusal, you have the right to appeal to the Upper Tribunal. To successfully appeal, you will need to show that the FCA failed to properly follow its procedures, failed to take account of all the circumstances (or gave weight to irrelevant factors) or made a mistake in interpreting the law. Formal appeals against FCA refusal are relatively uncommon, as most applications with issues are withdrawn.
Seeking legal guidance
Discovering that your FCA authorisation application has been unsuccessful can be discouraging. However, this setback need not be the end of your regulatory journey. With the right help and support, many unsuccessful applicants go on to overcome their initial rejections to become FCA-authorised firms.
If you’re facing challenges with your FCA authorisation application and need confidential advice, don't hesitate to reach out to our financial services solicitors. We offer tailored, current guidance to help you navigate this process successfully.
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