[Manchester, 5/16/2015] - The Final Notice published by the Financial Conduct Authority (FCA) on January 30 2015 provides an excellent example of the reasons as to why an authorisation application may be declined. The unsuccessful applicant, who is not named in the Notice, was refused authorisation to operate a debt management firm due to a previous criminal conviction, and due to the lack of skills and knowledge demonstrated in his application.

The individual was convicted of a criminal offence in 2011, and at the time of his application, was still serving his sentence for that offence, however he still failed to disclose the existence of this conviction on his application form. The FCA says that he did not offer any explanation for answering No to the question “Have you…ever been convicted of any offence...?”

The nature of the offence is not stated in the Notice. However, it appears to be an offence which makes the FCA concerned about the possibility of the individual holding face-to-face meetings with potentially vulnerable customers, meetings which could take place within his home as he did not intend to use any other business premises. The individual was planning to operate his business single-handedly, without any employees to whom he could delegate sensitive duties.

The undisclosed conviction may on its own have constituted sufficient grounds for refusing the application, on the basis that the individual is not ‘fit and proper’. Yet his application also demonstrated a lack of knowledge of financial services.

The applicant has worked in the industry before, but not in the last few years. He has not undertaken any training in recent months to update his knowledge.

The complaints procedure submitted by the individual gave rise to particular concern. This procedure named the Office of Fair Trading (OFT) as a body to which complaints can be made. At the time of the application, the OFT was still the consumer credit regulator, however neither the OFT nor the FCA has any role in investigating complaints about firms, and the applicant seemed unaware of the Financial Ombudsman Service (FOS) and the role it fulfils. The FOS was also not mentioned in the terms & conditions document submitted with the application.

Another area of concern was that the firm’s intended procedures regarding handling of payments received from clients may have breached the Unfair Terms in Consumer Contracts Regulations 1999.

The applicant also seemed unaware of which legislation covered customers’ cancellation rights on distance contracts, believing this to be the Consumer Protection (Distance Selling) Regulations 2000, as opposed to the Financial Services (Distance Marketing) Regulations 2004.

The FCA also adds that his compliance procedures were misleading, making reference to staff and departments within the firm carrying out certain duties, when in fact he was intending to operate as a sole trader.
All applicant firms must satisfy the FCA that they meet its Threshold Conditions – a set of basic requirements all regulated firms must meet. The conditions to be satisfied include the need to be ‘fit & proper’. A fit and proper assessment for a firm may cover areas such as: any previous dealings with regulators; the quality of internal systems & controls; the skill levels present within the organisation; and the financial crime risk posed.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

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