New firm authorisation | Submitting, assessing and determining a new firm authorisation
This section is for firms seeking authorisation to carry on regulated activities as a:
- credit union;
- insurer (both general and life); or
- managing agent of a Lloyd's syndicate.
There are several stages, set out in this section, to becoming a PRA-authorised firm:
What is a new firm authorisation?
Firms wishing to carry on one or more of the PRA-regulated activities as set out in the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (see External Links) (ie accepting deposits, effecting or carrying out contracts of insurance, or managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s) are required to apply to the PRA for authorisation (permission) to do so. Firms seeking authorisation to carry on regulated activities other than those listed above should apply to the Financial Conduct Authority (FCA) to do so. A list of all regulated activities is contained in the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (see External Links). The PRA will only authorise a firm if the FCA is also content for it to be authorised. In this section the PRA and FCA when referred to together, are referred to as ‘the regulators’.
What is the purpose of the pre-application stage?
Experience suggests that meeting with prospective firms before they submit their application can be highly beneficial for both parties. A number of structured formal meetings will help firms:
- understand the authorisation process and what happens at the various stages;
- understand the PRA’s expectations of firms and in particular the PRA’s and the FCA’s Threshold Conditions (see External Links);
- identify any particular concerns that the regulators might have early on and help firms make an informed decision about whether to spend time and money on an application that may not progress further; and
- submit as complete an application as possible.
However, there is no statutory requirement to meet the PRA before submitting an application – an application can be sent at any time and the PRA will use its statutory powers as set out in FSMA to reach a decision.
What do the pre-application meetings involve?
The pre-application meetings are intended to support a firm’s progress through the pre-application process and help it to submit as complete an application as possible. The PRA has found that three meetings are sufficient. These will generally be made up of:
- initial meeting – this is held after a firm submits its draft Business Plan. It provides an opportunity for firms to discuss their plan and ask the regulators questions about the authorisation process. The regulators will provide written feedback for the firm to respond to in their Business Plan;
- feedback meeting – this is held after an firm has submitted, and the PRA has reviewed, its updated Business Plan, which includes feedback from the initial meeting. The PRA will again provide feedback which the firm will be expected to address in its Business Plan; and
- challenge session – this is held just before a firm submits its application with the aim of discussing its proposals in depth and with the regulators providing detailed challenge on the content of the firm’s
near-final Business Plan. Firms will be expected to incorporate feedback from the Challenge session in their application.
Meetings are attended by both the PRA and the FCA and will typically be held at either the PRA’s or the FCA’s offices in London. Exceptions will primarily be made for internationally headquartered firms. To initiate a pre-application meeting the regulators would expect as a minimum an explanation of why a firm wants to be an authorised entity; and the initial business proposition and strategy including the:
- business plan – what products will be offered, how they will be offered and the target market;
- sources of funding – how the business proposes to fund its activities, and whether there are any investors and/or funding in place;
- corporate governance – details of structure, board, senior management and governance arrangements, as far as they are known.
All firms should review the information and application forms on the ‘Submitting, assessing and determining a new firm authorisation’ page to get a broader understanding of what the PRA (and the FCA) expects, and ideally submit the relevant information for the pre-application meeting in one document (known as the draft regulatory Business Plan).
The regulators may ask for further information, such as information on the proposed controllers if relevant, to facilitate a productive and useful initial meeting for all parties.
Firms applying as Lloyd's managing agents should have had detailed discussions with Lloyd’s prior to submitting an application to the PRA. A pre-application meeting will depend on the specifics of the application, but if necessary, pre-application will involve Lloyd’s and the firm.
The PRA’s and the FCA’s requirements for the business plan for credit unions are outlined in the document below:
Submitting a pre-application meeting request