Guide
FCA threshold conditions reference
Quick-reference page for the five FCA threshold conditions in Schedule 6 FSMA 2000 (as substituted by FSA 2012) and supplemented by SI 2013/555. Sets out the statutory wording, the FCA Handbook (COND) practical application, common refusal and cancellation grounds under section 55J, and the regulatory business plan evidence the FCA expects.
The FCA must be satisfied that you meet the threshold conditions before granting Part 4A permission, and you must continue to meet them at all times. This page sets out each condition, what the FCA Handbook (COND) expects in practice, and the evidence your regulatory business plan should contain. For the application route, see Apply for FCA authorisation.
Condition 1: Location of offices (paragraph 2B, Schedule 6)
If you are a body corporate constituted under UK law, your head office and (if any) registered office must be in the UK. If you are not a body corporate but your head office is in the UK, you must carry on business in the UK. The FCA reads "head office" as the place where central management and control are exercised: typically where the governing body meets, where strategic decisions are taken, and where the senior management with authority over the regulated business is based. A registered address with no decision-making activity will not satisfy the test.
COND 2.2 sets the practical bar. The FCA looks for evidence that mind and management sit in the UK, not just a brass-plate presence. Common refusal grounds include: directors and senior managers based overseas with only nominal UK representation; outsourced governance to a non-UK parent without UK board oversight; or a serviced-office address used solely for correspondence.
Condition 2: Effective supervision (paragraph 2C, Schedule 6)
You must be capable of being effectively supervised by the FCA. The FCA assesses group structure, the transparency of ownership, and the legal and regulatory framework that applies to entities within your group. Complex or opaque structures, jurisdictions with weak regulator-to-regulator cooperation, or arrangements that prevent the FCA from obtaining information from group members, are all grounds for refusal.
COND 2.3 sets out the factors. Your regulatory business plan should map the full ownership chain to ultimate beneficial owners, identify the regulator (if any) of every regulated entity in the group, and explain how information-sharing gateways will operate. Where part of the group sits in a jurisdiction outside the FCA's supervisory cooperation network, explain how the FCA will still be able to obtain information.
COND 2.4 (financial resources) and COND 2.5 (non-financial resources) split the assessment. For non-financial resources, the FCA looks for: management and staff with the skills, knowledge and experience to run the business; systems and controls proportionate to the nature, scale and complexity of the activities; risk management and compliance functions with sufficient seniority and independence; and clear succession plans for key roles. Refusals often turn on a single individual carrying multiple SMF responsibilities without credible succession, or on outsourced compliance that lacks day-to-day oversight by a UK-based senior manager.
COND 2.5 covers suitability of the firm and the people who own and run it. The FCA tests fitness and propriety of controllers, directors, senior managers, and significant influence function holders. Adverse findings, regulatory sanctions, criminal convictions, undischarged bankruptcies, or a pattern of failed firms in the controllers' history will weigh heavily against the application. The FCA also considers whether the firm conducts its business with integrity and in compliance with proper standards: prior misleading marketing, breaches by an unauthorised predecessor entity, or a culture that does not support the consumer-duty outcomes will all be relevant.
COND 2.7 frames the business-model condition as a forward-looking suitability test. Your regulatory business plan must show: the target customer base and how products meet their needs, the revenue model and whether it creates conflicts of interest, three-year financial projections with stressed scenarios, capital and liquidity headroom against the projections, and a credible wind-down plan. Refusals commonly cite optimistic revenue assumptions without external validation, conflicts that are identified but not mitigated, or a wind-down plan that assumes orderly customer transfer without identifying counterparties.
Cancellation of permission for ongoing breach (FSMA section 55J)
What the regulatory business plan must contain
The FCA does not prescribe a single template, but applications that satisfy the threshold conditions typically include each of the following. Use this as a checklist when assembling the business plan section of your application pack.
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Governance and location evidence
UK head-office address, board composition, frequency and location of board meetings, decision-making delegations, and a group structure diagram showing ultimate beneficial ownership.
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Resources evidence
Three-year P&L, balance sheet and cash-flow projections; stressed scenarios; regulatory capital calculation; liquidity buffer; staffing plan with named SMF holders and succession; outsourcing register with UK oversight arrangements.
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Suitability evidence
Fit and proper assessments for all controllers, directors and SMF holders; criminal-record and credit checks; regulatory references; conflicts-of-interest register; compliance and financial-crime frameworks.
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Business-model evidence
Target market analysis, product governance documentation, fair-value assessments under the Consumer Duty, distribution strategy, key risks and mitigations, and a wind-down plan with identified customer-transfer counterparties.
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Effective-supervision evidence
Group regulatory map, information-sharing arrangements with overseas regulators, data and reporting infrastructure, and named compliance officer accessible to the FCA in the UK.
Dual-regulated firms (PRA-designated activities)
If you intend to accept deposits, effect or carry out contracts of insurance, or carry on certain investment activities as a designated investment firm, you are a PRA-authorised person under the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (SI 2013/556). The PRA applies an additional set of threshold conditions in Parts 1C and 1D of Schedule 6 FSMA. These add a "legal status" condition (deposit-takers must be a body corporate or partnership; insurers must take a permitted legal form) and an "appropriate financial resources" condition assessed on a prudential basis. You must satisfy both the FCA conditions in Part 1B and the PRA conditions in Part 1C or 1D, and you will need PRA consent before the FCA can grant permission.
FSMA is reserved across the UK
Financial services regulation is reserved to the UK Parliament under Schedule 5 of the Scotland Act 1998, Schedule 7A of the Government of Wales Act 2006, and Schedule 3 of the Northern Ireland Act 1998. The threshold conditions apply identically in England, Scotland, Wales and Northern Ireland: there is no devolved variation. The FCA and PRA are the single UK-wide authorities.
The Gibraltar Authorisation Regime, established by the Financial Services Act 2021, is a separate cross-border framework: Gibraltar-based firms passport into the UK under approved activities and meet equivalent threshold conditions supervised by the Gibraltar Financial Services Commission with FCA cooperation. If your business model involves Gibraltar, treat the GAR route as a distinct authorisation pathway rather than a variation of the UK regime.