The Financial Conduct Authority (FCA) takes responsibility for regulating all financial services industries in the UK. To protect customers, increase market integrity and promote healthy competition, the FCA has three operational activities including authorisation, supervision and enforcement. This means that financial service providers, investment firms and consumer credit firms must be authorised. Additionally, banks, credit unions and insurance companies must also be regulated by the Bank of England's Prudential Regulation Authority (PRA).
What does it mean to be FCA regulated?
The FCA supervises approximately 59,000 financial firms and markets. Before a business can be supervised by the FCA, they must be authorised. This involves the FCA monitoring the firms to check they meet the required standards. FCA authorisation is a very lengthy process – it can take six months and sometimes much longer!
According to the FCA, almost all firms offering financial services in the UK must be authorised by us. They also advise customers to only deal with authorised firms. The details of firms, individuals and other bodies that are or have been regulated by the FCA or PRA are published on a public record called the Financial Services Register. This means that consumers can use the register to check the status of the firm they're planning to use.
Wherever and however you invest your money, there's always a risk that you might end up interacting with an untrustworthy firm, which could result in the loss of the capital you invested. Checking to see if a firm is FCA regulated means you can be confident that their treatment of customers conforms to the FCA's strict criteria. This takes much of the detective work and apprehension out of choosing a financial service provider, as the FCA ensure that all the firms they supervise are compliant with the necessary obligations outlined in the Financial Services and Markets Act 2000 (FSMA).
How do financial services providers become authorised and registered by the FCA?
A firm must submit an application form to the FCA, who will appoint a case officer. The case officer then works with the firm to understand its processes and procedures. Following this evaluation, the officer will assess whether the business meets the requirements laid down in the FCA Handbook. The FCA also takes responsibility for approving the key individuals within the firm, including all directors and certain others holding key positions, such as Compliance Officers. As part of this assessment, the FCA must be comfortable that the individuals are fit and proper to take on these roles. After deciding on authorisation, the FCA will write to the applicant either confirming authorisation or explaining why it has been rejected.
Firms must pay a fee when they apply, followed by an annual fee thereafter. They are also required to communicate with the FCA by filing regular reports that cover items such as client money and any complaints received.