FinTech West South Coast Hub masterclass: staying on the right side of the law and navigating the challenging regulatory waters

Oliver Woodhouse, senior associate and financial services regulatory lead in the commercial team and Andrew Roberts, trainee solicitor, recently presented at the second FinTech West masterclass, hosted by Barclays Eagle Labs.

During the session, Oliver advised businesses how they can secure new, and manage existing, authorisations with the Financial Conduct Authority (FCA). He also highlighted regulatory developments in the fintech sector requiring attention.

Oliver also provided an overview of the UK financial service landscape and the roles of the Prudential Regulation Authority (PRA) and the FCA.

This article summarises the topics covered in the session, including how fintech companies can get compliance right, secure FCA authorisation and manage existing authorisation. We also highlight some regulatory developments that may require attention.

Getting compliance right

It’s important for high-growth fintech companies to get compliance right from the start, ensuring implementation accurately reflects the business’ processes, to avoid falling foul of the law.

Figuring out how to build ‘compliance’ into your processes, systems and controls and getting your teams to embrace it are challenges that many fintech companies face.

Identifying effective legal support and advisors at an early stage can help businesses to better understand where the regulatory land lies and how best to navigate it.

Securing FCA authorisation

Businesses must ensure that they are ‘ready, willing and organised’ to operate, with required documentation and processes in place. This includes necessary business plans, forecasted financials, compliance materials and important contracts.

There are material challenges to securing FCA authorisations for new market entrants into the UK’s fintech and financial service sector. New authorisations currently taking up to 12 months, sometimes longer.

With a new government in the UK and the FCA now having secondary objectives to facilitate international competitiveness and support UK economic growth, perhaps we will see updates to the approach of authorisations in future?

Managing existing FCA authorisation

There is no doubt fintech founders will want to ensure that the journalists at TechCrunch hear about their latest news. It’s equally as important to keep the FCA up-to-date with the latest developments too.

For example:

• Investment rounds may bring on FCA change in control requirements.
• Personnel changes may require FCA approval of new senior managers.
• New product/services may require further FCA application to update your scope of permission and consideration to specific FCA rules and guidance.
• FCA reporting and notification requirements for your type of firm.

Regulatory developments requiring attention

There are a number of industry developments that may require attention, depending on a businesses’ activities:

• Scope of the Senior Managers & Certification Regime (SMCR) and consultation to expand to non-financial misconduct, including FCA and PRA diversity and inclusion initiatives for regulated businesses. We considered application and what this might mean for firms.
• Consumer Duty developments - a much-needed primer on changes which came into force for open products and services on 31 July 2023, and the looming deadline for closed products and service. This looks into FCA expectations, the Consumer Duty principle, cross-cutting rules and specific outcomes. Firms should also have considered first annual board reports, assessing compliance with these FCA rules and guidance, by the end of July.
• Cryptoasset and Stablecoins are fast-moving areas, receiving a lot of regulatory attention in recent years/months, with an ongoing consultation to expand the FCA’s regulated activities regime to Stablecoins and, later, Cryptoassets. This is in addition to Money Laundering Regulation and financial promotion requirements that apply to firms.

Find out more about Ashfords’ fintech practice

If you want to learn more about our fintech practice or have queries on any of the topics above, please contact Oliver Woodhouse.

Find out more about the FinTech West South Coast Hub

If you’re interested in attending future Fintech West South Coast Hub events, sign up to their newsletter and join their community here.

If you want to learn more about what the hub is doing to build a healthy, vibrant fintech ecosystem, contact matthew.stammers@fintechwest.co.uk.

Register here for the second instalment of FinTech West's Future of Payments series, on Tuesday 17 September at our Bristol office.