Preparing an FCA Application for Authorisation: Service description and permissions mapping

Introduction

When setting out to prepare an application for authorisation as a Payment Institution or Electronic Money Institution, establishing the specific regulatory permissions that will be required is of the utmost importance; if your firm does not receive the correct permissions upon authorisation, its ability to provide the anticipated regulated services will be at risk (including whether future service developments or functionality can be provided). For an application for authorisation, you must be very clear on what permissions you are seeking authorisation for and base your descriptions of capital, safeguarding, risk management, etc. on those permissions. The application should also include a clear mapping of your service description, at a functional level, to the specific regulatory permissions that you are seeking (preparing a table to map permissions to functionality is sensible).

Changing permissions after authorisation

If you want to change permissions at a later date this will involve a ‘Variation of Permissions’ application submitted to the FCA – this is not as involved as an application for authorisation but will require a reasonable amount of detail, including service description, business plan and financial forecast, descriptions of outsourcing arrangements, resources, financial crime controls, etc. The process will take time and may delay business activities pending the permissions being granted by the FCA. It is therefore important to seek the correct permissions from the outset, i.e. in your application for authorisation.

Payment Institutions vs Electronic Money Institutions

It should also be noted that whilst a Payment Institution can vary its permissions to include additional payment services it cannot vary its permissions to include e-money – an application for authorisation as an Electronic Money Institution would need to be submitted (and the PI authorisation surrendered upon EMI authorisation). If you are applying to become a PI you should be certain that you do not wish to offer e-money service functionality.

Why permissions mapping underpins a successful application

Establishing a clear service description and mapping it to the required regulatory permissions is foundational to the success of an application for authorisation. Uncertainty regarding the permissions required will inevitably cause problems defining the scope of applicable regulatory requirements and the arrangements to be operated by the applicant firm – these will need to be described in detail in the application for authorisation (at a level that meets the FCA’s requirement for applicants to be “ready, willing and organised” for authorisation).

A practical approach to determining required permissions

What is the best way to determine the regulatory permissions that your firm requires?

The following three steps should help:

• STEP 1: Agree a service description (clear concise and focussed description of the services at a functionality level).
• STEP 2: Agree near term service development. Include in the service description the near term development of services / functionality rather than aspirational ‘blue sky’ developments that will be subject to change and uncertainty and which will most likely undermine the credibility of the application materials.
• STEP 3: Map the regulatory permissions. Services and near term developments at a functional level should be capable of being mapped to specific regulatory permissions – a mapping table should be prepared for inclusion in the application.

How we can assist

We are experienced at developing suitable service descriptions and advising firms on the permissions that are required to support service provision, either as part of an application for authorisation or in relation to the development of new services. If you do not have a clearly documented service description and clear mapping of regulatory permissions please feel free to contact us.