If you're a member of a network it’s easy to sometimes think that the grass greener on the other side – should you be directly authorised?
There is no easy answer to this. We've helped many firms over the years become directly authorised and they've never looked back. However, it's not for everyone.
Here are some things to consider when weighing up whether to remain part of a network or become directly authorised with the regulator:
Being a member of a network
Being directly authorised
As can be seen above, becoming directly authorised is not an easy decision.
If you do decide to take the plunge, you need to start looking at the FCA application process. As well as completing the FCA forms you will need to provide:
- Business plan (5 years)
- Cashflow forecast
- Profit and loss forecast
- Compliance monitoring plan
- Opening balance sheet
- Forecast closing balance sheet after 12 months trading or first year's trading;
- Monthly profit and loss account for the first years of trading;
- Monthly cashflow forecast;
- Latest accounts (if previously traded);
- Professional Indemnity Insurance quotation
- CVs for advisers and directors
- Organisational chart
- Copies of qualifications for all advisers and SPS certificates for investment and pension advisers
You will also need to provide details of any shareholders of the firm.
For brand new firms, usually the owner will put in their own funds as start up capital and to meet the capital adequacy requirements. This money can be put into the firm by way of a subordinated loan. This is where the principal will have a formal agreement with the firm which confirms when the loan will be repaid and how much, if any, interest the firm will pay on the loan.
This ‘loan’ then does not show as a liability on the balance sheet but is declared on the FCA returns. This can be repaid to the director at any time as long as the capital adequacy of the firm is not compromised. However, the intention is usually to keep the loan in place for three years. The wording for the subordinated loan agreement can be found on the FCA website.
If you are considering being directly authorised by the regulator but want some professional help in making the application, then a good starting point is referring to the Association of Professional Compliance Consultants (APCC). Before using a consultant ask yourself:
- What support do you feel you need?
- What personnel resource will you have to focus on compliance?
- How much are you looking to spend?
The compliance support firm should:
- Be competent to do the job
- Have sufficient resource to look after the firm
- Ideally have their own PI insurance
- Hold their own data protection licence
- Be well qualified/ experienced
The APCC can provide you with a list of compliance consultants around the UK detailing the areas which the compliance firm specialises in. All these firms subscribe to the APCC and by doing so adhere to a professional code of conduct.
Alternatively, you can refer to the CATS website for further details on what you need to do if you want to become directly authorised.