Preparing your firm's financial information – minimum standards

Below, we have compiled a ‘to-do’ list to prevent any delays in the processing of your application due to shortcomings relating to the financial information:

• Information is required to be customised in line with your own business, its legal structure and the relevant practices in your sector.
• Basic financial information should cover 3 detailed sections: income statement, balance sheet and cash flow statement.
• Projections should cover a period of 3 years and Excel format is considered best practice; ideally to include monthly and yearly projections.
• Any additional notes to the financial information and key assumptions supporting the forward-looking business plan, should be clearly and adequately articulated.
• Financial information must be fully aligned with the legal entity seeking authorisation.
• Quantification of the application prudential regime including relevant material such as details of share capital, term sheets for capital enhancing instruments, etc. is necessary.
• The quantity and quality of the instruments proposed meeting the FCA’s prudential requirements should be verifiable.
• Lastly, all the information provided must be in English.

If a firm applying for authorisation has been in business already, then the FCA is likely to ask for historical information for up to the past three years.

From the FCA’s perspective, the objective of the financial information is for the applicant firm to be able to exhibit the following:

1. It is ready, willing, and organised to start the regulated business activities.
2. The firm's financial resources are proportionate to the risk of harm and complexity of the business.
3. The firm can hold enough assets to cover its debts and liabilities, profitability, capital, and liquidity position.

Furthermore, the FCA has published a Financial Analysis Template for Wholesale firms which sets a good benchmark to ensure quality of the financial information being prepared as part of the application.

For more than a decade, the constantly changing regulatory landscape has posed its own challenges in preparing capital and liquidity adequacy projections on a proportionate basis. We have worked with numerous successful applications with regards to their financial and prudential information preparation and have dealt with questions from the FCA whether they relate to the calculation of the fixed overheads requirement, complex K-factors, presentation of the financial information or stress testing of the projections.

If you need support with the preparation of your financial regulatory data or would benefit from an independent review, please get in touch.