The UK's commercial finance brokers are crucial in getting funding through to the businesses that need it. So how this conduit for funding UK businesses deals with its transition to become a regulated industry under the Financial Conduct Authority is of broad importance.
Our research shows that there have been a few teething problems – with 736 brokers having already withdrawn their applications for FCA authorisation.
Obviously, the approval process for the FCA was never going to be easy. The FCA, quite rightly, expects high standards from the businesses it regulates. But the detailed requirements for authorisation – spanning aspects of a firm's financial and non-financial operations – have led to many of these withdrawals.
It seems that some SME finance brokers may need more support with the transition to FCA regulation.
Callum Stevenson, our Head of Strategic Business Development, says that for many smaller brokers, full FCA authorisation presents a real challenge. Even if a firm gets its initial application approved, they will later need to demonstrate that they are continuing to comply with the policies they submitted. That may mean allocating additional resources to ensure that the firm is being compliant with the regulations.
None of us in this industry wants to see these good smaller brokers leaving the market. That's why a lot of professional advisers have begun to highlight a cost-effective alternative to full FCA authorisation – 'Appointed Representative' status.
An Appointed Representative is a person or firm which conducts regulated activities under the permissions of a firm directly authorised by the FCA. The directly authorised firm is known as the Appointed Representative’s 'principal'. The principal takes full responsibility for ensuring that the Appointed Representative is able to meet the FCA's regulation and reporting requirements.
Applying for Appointed Representative status is a sensible alternative for many smaller firms that want to help businesses expand as the economic recovery gathers pace. SME finance brokers are crucial to the growth of the UK's smaller businesses, and we want to help the industry through the challenges it now faces.
Brokers who want to explore the advantages that Appointed Representative status can offer should give Callum Stevenson, our Head of Strategic Business Development a call on 01244 527 300.