FCA Publishes Findings of “Early and High Growth Oversight” Review

March 10, 2023 Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Metaverse, NFTs, Entrepreneurs, Start-ups, Small Businesses, Equity Crowdfunding, Alternative Funding, FinTech and Alternative Finance, Fintech International, Fintech Services, Innovation and Resources, Regtech, Compliance, Governance No comments

FCA | March 10, 2023

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Following a successful pilot, we’re expanding Early and High Growth Oversight, providing closer support for 300 newly authorised businesses by the end of 2022/23.

Firms can face challenges in meeting their regulatory obligations in the first few years after authorisation. In response, we have initiated a new approach called Early and High Growth Oversight. This provides enhanced supervision for firms as they get used to their regulatory status and supports them to understand their obligations so they can meet the standards we expect as they grow. It will also ensure that we can identify and address harm developing in newly authorised firms quicker.
During 2021-2022, we conducted a multi-firm review of 25 FCA solo-regulated firms which had experienced fast growth over a 3-year period. We assessed the impact of this rapid growth on their financial and non-financial resources. The review was based on business plans, internal capital adequacy assessment process (ICAAP) documents, wind-down plans and other documents submitted by firms.

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We saw that for most firms:
- Their risk management framework and governance arrangements (including staffing in second and third line of defence) have not kept pace with the growth in their business activities. While risk management practices at these firms may have been proportionate at authorisation, they had not evolved to scale with the business. This can result in an increased risk of poor outcomes for consumers.
- Firms’ assessment of the adequacy of financial resources did not consider the growth in their underlying business resulting in financial resources assessments that were not commensurate with the size, business model and underlying risks. This can affect the financial resilience of firms, increasing the risk of disorderly firm failure.
- Wind-down plans were inadequate following the fast growth of these firms, increasing risk of harm in the event of firm failure.

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NCFA Jan 2018 resize - FCA Publishes Findings of "Early and High Growth Oversight" Review The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org