The FCA recently issued a consultation paper on its proposed approach to assessing adequate financial resources for solo-regulated firms subject to threshold conditions and/or the Principles for Businesses.
Responses to the consultation paper have been requested by 13 September and the FCA is promising to publish its finalised rules in a policy statement towards the end of the year.
In the meantime, CP19/20 offers some valuable insights into the regulator’s expectations on adequate financial resources – and the practices and procedures you’ll need to have in place to remain compliant.
In a nutshell, the regulator says it expects firms to do the following:
- Conduct regular and proportionate assessment of risks – by taking a forward-looking view of how risks evolve over time (taking account of your firm’s degree of exposure), reviewing your assumptions at least annually, and striking an appropriate balance between ensuring financial soundness and incurring disproportionate cost
- Establish clarity around a business model and strategy that takes due account of current and emerging risks and vulnerabilities that could affect your firm’s ability both to generate acceptable returns and provide access to adequate capital to support your business, allowing for any losses that might arise
- Prevent harm from occurring – by ensuring you have the ability to detect, identify and rectify problems in their early stages – a key part of which will be having a sound risk management and controls framework in place
- Put things right when they go wrong – by identifying sources of potential harm and estimating their impact, considering potential depletion of financial resources and issues around monetising assets in a timely manner.
- Minimise the harm of any failure – by considering scenarios that could lead to financial stress and how your firm would be able to maintain resources while it exits the market.
How can Thistle help you?
If you’d like to know more about how this will affect your business, our expert team will be happy to help.
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