Meet FCA threshold conditions for authorisation

Before the FCA gives you permission to carry on regulated activities, it must be sure you will satisfy, and go on satisfying, the threshold conditions. If none of your activities is a PRA-regulated activity, five conditions in Schedule 6 to the Financial Services and Markets Act 2000 apply to you. They are set out in paragraphs 2B to 2F, and they apply across the UK.

Keep your head office in the UK

If you are a company incorporated in the UK, your head office and, if you have one, your registered office must be in the UK. If you are not a body corporate, your head office must be in the UK and you must carry on business here. Different tests apply to firms that carry on insurance distribution and to some fund managers.

In the company details of your business plan, give your principal place of business and your control structure in full.

Be capable of being supervised

The FCA must be able to supervise you effectively, taking account of everything relevant. That includes the nature and complexity of your activities and products, how your business is organised, whether belonging to a group would get in the way and whether you are subject to consolidated supervision.

It also looks at your close links. These are a parent, a subsidiary, a company with the same parent, or anyone who owns or controls 20% or more of your votes or capital, or whom you control to that extent. If a linked person is subject to the law of a country outside the UK, the FCA asks whether that law, or weak enforcement of it, would stop it supervising you.

Map your group and control structure for the FCA. If some of your senior managers are overseas, explain how they will do their jobs from a distance.

Have appropriate resources

If your only regulated activities are certain limited credit activities, the financial test is that you can meet your debts as they fall due. The FCA also looks at the skills and experience of the people who manage you, and whether your resources are enough for you to comply with its requirements.

However large or small you are, you need financial forecasts before the FCA will assess your application. They are an income statement, balance sheet and cash flow statement, with the notes and key assumptions behind them. Three years of forecasts is best practice, as are three years of accounts if you already trade. Some firms must also submit a wind-down plan showing how they would leave the market in an orderly way.

Show you are fit and proper

You must be a fit and proper person, judged on all the circumstances. The FCA considers these points:

• your connections with other people
• the interests of consumers and the integrity of the UK financial system
• whether you have complied with its requests for information
• whether the people who manage you have adequate skills and experience and act with probity
• whether your business will be managed in a sound and prudent way
• how far your business could be used for financial crime

Give the FCA details of everyone who will run the firm, the senior management function each will hold and their experience. Individual controllers need a criminal background check dated no more than six months before you apply.

Disclose everything the FCA asks for. It can refuse an application if you deliberately withhold information or give false or incomplete information.

Fit your business model to your activities

Your strategy for doing business must be suitable for the regulated activities you carry on or want to carry on. The FCA asks whether it is compatible with running your affairs in a sound and prudent way. It also considers the interests of consumers and the integrity of the UK financial system. This condition does not apply if your only regulated activities are the limited credit activities mentioned above.

A generic business model counts against you. Describe your specific activities, how they match the permissions you want, your fees and your customers' journey. Identify conflicts of interest and say how you will manage them. Show how you will meet the Consumer Duty if it applies to you.

Allow for the decision time

The time limits for a decision run from when the FCA receives your application.

If the FCA thinks you fall short

If a case officer thinks you do not meet the standard, they recommend refusal to an executive decision-maker, who may issue a Warning Notice. You can reply with written representations. If the decision-maker then refuses the application, you receive a Decision Notice, which you can refer to the Upper Tribunal by the deadline it gives. The application fee is not refunded.

You can withdraw an application at any time before it is determined, fix the problems and apply again. Many firms do this after feedback from their case officer, though the fee is not refunded.

What happens if you stop meeting the conditions

Once you hold permission, the FCA can vary or cancel it on its own initiative. It can do so if it appears that you are failing, or are likely to fail, to meet the threshold conditions, or if you have not carried on a regulated activity for at least 12 months.

Carrying on a regulated activity without permission or an exemption is a criminal offence. On conviction on indictment it carries up to two years' imprisonment, a fine, or both.