Written by Jad Soubra
On 13 May 2022, the FCA published a final notice setting out its decision to refuse an application by Alexander Jon Compliance Consulting Limited (“AJCC”) for authorisation. AJCC is a compliance consultant and sought FCA authorisation in order to provide regulatory hosting services to investment businesses, whereby it would take regulatory responsibility for a limited number of appointed representatives (“ARs”).
The FCA was not satisfied that AJCC (which has one director and (as yet) no employees) had the appropriate skills, experience or staff to manage and oversee an investment business as principal. AJCC also failed to adequately describe its business model, competitive advantage or the long-term viability of the business to the FCA's satisfaction, as it was not able to identify prospective ARs or be specific about the businesses it intended to take on.
The FCA's concerns were compounded by the fact that AJCC would act as a regulatory host. As principal, AJCC would be wholly responsible for oversight and compliance of the ARs with FCA requirements, and so any failure of AJCC to do so would expose consumers to the risk of harm.
Alongside issuing its notice, the FCA has used this decision as a reminder to firms engaging in the provision of regulatory hosting services that they are accountable for the actions of their ARs and must demonstrate adequate ability and skill for proper supervision of these parties.
Is this final notice a further sign of the regulator's direction of travel as far as AR models are concerned? Maybe. But the final notice does somewhat suggest that AJCC was under-prepared for the FCA's scrutiny and was not perhaps as 'ready, willing and organised' to comply with the FCA regulation as it could have been, so presumably may have been refused authorisation even without the hosting model aspect to its application.
"The FCA is also reminding those providing regulatory hosting services that they are accountable for the actions of their ARs and need to have the ability and skill to properly supervise them. The FCA has previously highlighted common issues with oversight of ARs and committed to improving the standards in this sector as part of its 2022-2025 Strategy."