What are the conditions for FSA authorisation

These are the minimum statutory criteria needed to obtain and retain FSA authorisation. Essentially, a firm will not be able to carry on regulated activities as an insurance intermediary unless:

1. Its close links (eg any parent or subsidiary or fellow group member) do not prevent or hinder FSA supervision.

2. It has adequate financial and non-financial resources and adequate means of managing them.

3. It is suitable, eg has ‘fit and proper’ personnel.

Relevant matters include integrity, competent and prudent management and the exercise of due skill, care and diligence; see ‘Approved persons’ below. There are additional threshold conditions for insurers. The firm will not be able to carry on the regulated activities of effecting or carrying out insurance contracts in the UK unless it complies with the threshold conditions 1–3 above, and:

4. It is a body corporate (other than a limited liability partnership), a registered friendly society or a member of Lloyd’s.

5. It is located in and does business in the UK (eg has a head office or registered office here) and, in the case of motor vehicle liability insurance, has a claims representative in every other state of the European Economic Area (EEA).

Conditions 1 and 2 need further explanation. The main purpose of the closelinks rule (1) is to give the FSA an overview of ownership and control of the applicant and of those organisations that it owns or controls. Close-links diagrams can be very complex; a 20 per cent involvement is sufficient to render an organisation a parent or subsidiary. Close links to a company subject to the laws and regulations of a state outside the EEA may prevent effective supervision by the FSA. Authorised firms have ongoing obligations in relation to notification to the FSA of changes in close links. The second threshold condition in effect requires the FSA to form a view of the resources available to the firm and to consider the impact (positive or negative) of its position within a group. Afirm’s resources must be sufficient for the activities it undertakes. The FSA may take into account the fact that the authorised entity is a member of a group.