This article looks at how to obtain a finance license.
According to the Financial Services and Markets Act (FSMA) 2000, financial activities must be regulated by the Financial Conduct Authority (FCA). If you wish to carry our a regulated financial activity you must apply to become regulated by the FCA by obtaining the appropriate license. Banks and insurance companies are regulated by both the FCA and the Bank of England through the Prudential Regulation Authority (PRA).
1. Timeframe: how long it takes to obtain a license
The application assessment stage takes up to 6 months if you have submitted a completed and thorough application. However, where an application is considered as not being complete it can then take up to 12 months for your application to be assessed. When you apply you must also pay an application fee to the regulator. The fee amount will depend on the type of regulated service you wish to provide and your forecasted turnover.
2. Regulated financial activities
You must first decide what type of financial services firm you wish to become.
The following is a list of financial services firm types:
a. Banks and credit unions
b. Claims management companies
e. Financial advisers
g. Investment management firms
h. Life insurers and pension providers
i. Mortgage lenders and brokers
k. Wealth managers
3. Preparing and completing your license application
The application form will require information concerning your management and people, business model, risk and compliance management procedures. The regulator will also want to understand that you have adequate capital to manage the business whilst providing a safe and secure service in a competent manner. You must explain how you will look after your customers. For example, you must explain how you will ensure that you treat customers fairly. The application will require you to provide details of all the risks which you have identified in your business and how you will mitigate or manage those risks. You will be required to provide details of your systems and controls in place. The regulator will also want to see evidence that the key people involved in the business are fit, proper and honest to manage the company, whilst possessing the skills and experience to manage the business.
4. Submission and post-submission of your application
You must submit your application online using the FCA’s online portal, namely, Connect. You will be required to pay your application fee when you submit your application. After submission, you will be sent an email by the FCA to confirm the submission of your application. They will also provide you with your application submission reference number. Later, you will be assigned a case officer. The role of the case officer is to assess your application. It is likely that your case officer will come back to you with some further questions concerning your application. Provided that you answer all the questions in a satisfactory manner and address any issues raised, your application will finally be approved.