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Stage two: Regulatory review

The regulatory review process is how the FCA will supervise all smaller firms. The review will either be:

  • a face-to-face interview with the FCA
  • a telephone interview
  • an online or paper-based assessment

The way in which the FCA will select firms for a particular type of review will be driven by a number of factors. A major consideration will be the limitations of their resources which means that they will be unable to use supervisor led interaction in every case. Therefore the fact a particular firm receives a particular type of review is not a good or bad reflection on them but rather that the FCA is using their resources in the most appropriate way.

You will be given much more information about what to expect at the workshops when you are invited. The FCA will then notify you in writing about where, when and how your review will take place.

Review aims

This review will aim to look across your firm and measure the effectiveness of your senior management in identifying and addressing the risks and controls you have in place. It will also look at the financial soundness of your firm and your ability to continue to provide products and services to customers.

The review will focus on five key areas

  • Business Model – How does your business work? What products do you sell, how many advisers are involved, what fees to you charge etc.
  • Management – who is responsible for compliance around the sales and advice process?
  • Controls – evidence of embedded TCF practices, appropriate MI, training and competency
  • Prudential – what is the financial structure of your company and how do you manage risk and liabilities such as capital, liquidity, complaint handling etc.
  • Environment –your area of operation for example whether you are a broker, IFA, stockbroker etc.

This approach to supervision will allow the FCA to form an overall view of your firm and identify risks. They will give you feedback at the end of the review outlining any good practices they observe. If they find there are areas that you need to make improvements on, they will tell you what these are and expect you to take the necessary steps to reduce the risks they have identified.

Your review is an opportunity for you to:

  • get reassurance that you are meeting FCA requirements;
  • receive feedback on areas that you should review;
  • discuss your business directly with the FCA; and
  • demonstrate to the FCA good practices within your firm.