Early Oversight Function Pilot

The FCA set out in its Business Plan 21/22 how it is changing to improve performance and meet future challenges, including plans to make changes to be faster, more targeted and more efficient. A few of the key areas of focus are summarised below, including specific information about a new process that the FCA intends to adopt with newly authorised firms, namely the ‘Early Oversight Function’.

Using new approaches to find issues and harm faster

Investment in the FCA’s Data Strategy over 3 years will automate more of the data collection, better analyse data across systems and allow them to act earlier to prevent or stop misconduct and strengthen their holistic firm assessments. Over the next 12 months the FCA will strengthen the foundations of their data, improving accuracy and accessibility. This will mean they can use it more effectively to identify harm and intervene more quickly. They will also build capability to deliver automation and efficiencies, improve systems and infrastructure and use technology to make operations more efficient. It is also intended that they will use advanced analytical techniques to proactively identify and prioritise firms or harms for investigation.

Setting the bar high to support market integrity and sustainable innovation

Setting standards is one of the ways the FCA supports innovation and competition, which benefit consumers and the economy. The FCA wants firms to be clear about what is expected from them, including from their governance and culture.

Ensuring firms start with high standards and maintain them

The business plan explains that the FCA is introducing ‘a more robust gateway for new firms’, the standards will be higher with more intensive assessment and greater scrutiny of firms’ financials and business models. While the assessment will be tougher, the application process will be more straightforward with easier to use forms and better digital applications.

The Early Oversight Function: stronger oversight of newly authorised firms

There will also be stronger oversight of newly authorised firms. Approval is based on a firm’s business plans which can evolve significantly in the early stages. As firms are developing the FCA will provide oversight to check that they comply with rules and to identify harm early.

To pilot the process, the FCA has sent an email to 30 firms which were authorised in the last 6 months, or recently changed their permissions/business model, advising that they will be participating in the Early Oversight Pilot. The pilot begins in Q4 of 2021 and is expected to last for 6 months. Firms will receive a more detailed welcome letter, followed by an introductory call. The Early Oversight Function is a post-authorisation ‘transition’ stage and will monitor and support firms to help them understand their obligations.

The FCA believes that there are benefits to being included in the Early Oversight Pilot. These include a dedicated team to monitor and support firms in meeting their obligations. This includes support in setting up reporting systems that provide more timely and accurate regulatory information to the FCA and answering regulatory queries. Firms will also be asked to engage, input and provide feedback to enhance the Early Oversight Function and experience for all newly authorised firms in the future.

Once the Early Oversight Function is fully rolled out, it is intended that all newly authorised firms will participate for a period of 2-3 years.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Shirley has a wealth of industry experience and proven track record of working closely with firms to deliver high quality compliance and T&C solutions across a wide range of regulatory disciplines.

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