Pre-application stages

What to consider when preparing your application.

To prepare your application you should:

  • decide your business model including:
    • your scope of permission
    • whether you fall under any EU Directive
  • create a Connect account
  • fill out your application pack
  • organise resources to demonstrate compliance with threshold conditions
  • submit your authorisation application on Connect

Read more about the main things you need to do before applying to us for authorisation

We provide different support tools to firms to help you through your regulatory journey. These include:

Products, services, customers and geography

There are 2 primary products to provide asset management service – segregated and pooled.

A segregated portfolio involves one investor while a collective portfolio involves more than one investor, whose assets are being managed as if these were one investor. An asset manager could manage both segregated mandates and collective mandates.

Providers of core asset management services include:

  • mainstream asset managers
  • hedge fund managers
  • private equity managers
  • discretionary private client managers
  • other asset managers

Determining your customer or investor type and the geography of your customers/investors will further decide how you should set up your business. See our Handbook COBS 2.3 – Clients to help you determine the client types you intend to serve or promote investment products.

The geography of your clients/investors is your commercial decision as you may want to serve clients in one or more of the following – UK, EEA (excluding UK), and rest of the world. The rules apply differently depending on the different jurisdictions. FCA authorisation can only provide access to UK markets and EEA markets for some services, while any access to rest of the world would depend on rules of such local jurisdictions.

View our diagram providing a high-level illustration of the different European legislation and regulatory regimes that can be relevant when a firm undertakes individual portfolio management on the one hand, and collective portfolio management on the other (PDF)

Firms should satisfy themselves, taking independent advice as necessary, on which permissions they need to conduct their business.

EU directives and your business model

You need to decide whether your business model is covered by any EU Directive. If yes, then you need to consider requirements stipulated in such EU Directives in addition to FSMA requirements.

Your product type – segregated vs pooled – will dictate whether you fall under the Markets in Financial Instruments Directive (MiFID) or not. Please note that Article 2(i) of MiFID II level 1 directive exempts collective investment undertakings and pension funds whether coordinated at Union level or not. It also exempts  the depositaries and managers of such undertakings, exempting all CIU managers from MiFID for their CIU business.

Pooled vehicle type

Location of vehicle

Type of vehicle

Types of assets

Type of investors

Marketing jurisdictions

UK Authorised UCITS

UK

Open ended
Must be structured as an Authorised Contractual Scheme (ACS)*, Unit Trust, or Investment Company with Variable Capital

 

Generally Transferable Securities; approved money market instruments; units in collective investment schemes; derivatives and forward transactions and deposits

For further information on investment and borrowing powers and associated limits, please see COLL 5.2

Can be marketed to the general public in UK

An authorised fund will be recorded on the FS Register

UK

Can also be marketed in the EU if the fund has made the notification needed to use the UCITS marketing passport

UK Authorised AIF – Non UCITS Retail Scheme

UK

Open ended 
Must be structured as an Authorised Contractual Scheme *, Unit Trust, or Investment Company with Variable Capital

Generally Transferable Securities; money market instruments; units in collective investment schemes; derivatives and forward transactions, deposits, immovable property and gold

For further information on investment and borrowing powers and associated limits, please see COLL 5.6

Can be marketed to general public in UK

An authorised fund will be recorded on the FS Register

UK

Can also be marketed to professionals in the EU if the manager has made the notification needed to use the AIFMD marketing passport

UK Authorised AIF –Qualified Investor Scheme

UK

Open ended 
Must be structured as an Authorised Contractual Scheme *, Unit Trust, or Investment Company with Variable Capital

 

  1. Any specified investment
  2. Within articles 74 to 86 of the Regulated Activities Order, and
  3. Within Article 89 (Rights to or interests in investments) of the Regulated Activities Order where the right or interest relates to a specified investment in (a)
  4. An interest in an immovable under COLL 8.4.11R (investment in property)
  5. Precious metals, or
  6. A commodity contract traded on a RIE or a recognised overseas investment scheme

 

For further information on investment and borrowing powers and associated limits, please see COLL 8.4

Units can only be
promoted to persons under COBS 4.12.4R 

An authorised fund will be recorded on the FS Register

UK

Can also be marketed to professionals in the EU if the manager has made the notification needed to use the AIFMD marketing passport

UK Authorised AIF –European Long Term Investment Fund

UK

Can be set up under a number of different structures – see ELTIF Regulation

The Eligible investment assets are set out in Article 10 of the ELTIF Regulation. Plus an ELTIF can invest in assets referred to in Article 50(1) of the UCITS Directive

Professional investors. The ELTIF can also be marketed to retail investors when certain additional criteria are met – see Articles 27-31 of the ELTIF Regulation.

An authorised fund will be recorded on the FS Register

UK

Can also be marketed in the EU if the fund has made an application under the ELTIF marketing passport

Recognised funds – EEA UCITS

EEA countries except UK

Open ended
Will normally be structured in vehicles which are equivalent to the UK’s Authorised Contractual Scheme, unit trusts or  investment companies with variable capital

 

Generally Transferable Securities; approved money market instruments; units in collective investment schemes; derivatives and forward transactions and deposits

See UCITS Directive

Can be marketed to general public in UK if they are recognised here under the UCITS marketing passport

A recognised scheme will be recorded on the FS Register

UK

 

Recognised funds – individually recognised collective investment scheme

Anywhere but UK

Can be set up under a number of different structures

Normally will be those that are set out for the scheme types above

Can be marketed to general public in UK if they are recognised here

A recognised scheme will be recorded on the FS Register

UK

Unauthorised AIF

Anywhere

Can be set up under a number of different structures

No restriction 

Professional investors

A small number of unauthorised AIFs may be able to be marketed to retail investors in the UK; however specific approval would need to be given by the FCA under Article 43 of the Directive

UK – Professional investors -  under Article 31 of AIFMD or through the UK’s National Private Placement Regime

Marketing may also be able to be directed at professional investors in the EU if a marketing passport notification has been made under Article 32 of AIFMD  

EuSEF or EuVECA AIF

EU member states only

Can be set up under a number of different structures

Restricted to qualifying portfolio holdings only – see EUSEF and EUVECA Regulations

Primarily for professional investors – see the EuSEF and EUVECA Regulations for more information

UK

Can also be marketed in the EU if the fund has made an notification under the marketing passport

*Only certain investors are able to invest in an ACS – these are professional investors as defined in Appendix 3 of The Markets in Financial Instruments Directive; a large ACS investor – this is an investor who has £1 million to invest in cash or contributes property of not less than £1 million or is an investor who is already invested in an ACS.

AIFM approval

The AIFMD and UK AIFMR provides flexibility to smaller AIFMs that do not need to comply with the entire Directive.

This comes with lower flexibility as well. A sub-threshold AIFM cannot take advantage of management, branch, and/or marketing passports available to above-threshold AIFMs.

See an overview of the different authorisation options under AIFMD (PDF)

Other approvals needed

Approval for funds

The funds you plan to manage might need separate approval from us or another regulator where the fund has been incorporated. Investment funds that are structured as collective investment schemes (CIS) must be authorised or recognised by us to be promoted to retail investors in the UK. Examples of UK authorised funds include UCITS, NURS, ELTIF, or QIS. Unauthorised funds might still need a notification of management, i.e. a simple approval with a relevant reference number.

See an illustration and explanation of 3 fund structures that can be used for investment funds (PDF)

Find out more about authorised funds and unauthorised funds.

Sensitive business name approval

You need to get a view from the FCA and consent from the Secretary of State to use a business name containing certain sensitive words relating to financial services.

Find out more about these words and how to apply for permission to use them.

CRR CET1 approval

If you are an IFPRU firm raising common equity for meeting regulatory capital requirements, you will need approval under CRR from us

When we approve your corporate application, we also approve/review the following components of your application:

Controllers

A ‘controller’ is defined within section 422 FSMA and includes any person who holds a certain level of influence over a UK authorised firm, whether directly or indirectly, such as shareholdings, voting and non-voting rights, partnership interests, significant influence and the rights to share in profits or giving rise to contribute to debts.

Find the right controller forms to be submitted along with your authorisation application.

Approved person’s applications

An 'approved person' is an individual who we approve to do one or more activities - what we call 'controlled functions' - for an authorised firm.

Find out more about approved persons.

Client money and assets

You might be covered under our client asset (CASS) rules for client money and/or client assets. 

Read about client money and assets.

Your prudential category

Your prudential category depends on your scope of permission and the risks to your business model. Asset managers are usually covered under BIPRU, IFPRU, or/and IPRU-INV prudential sourcebooks.

Use our tool to help you identify the key regulatory requirements that determine your prudential category.

Your marketing/promotion plans

As a fund manager, you need to know what marketing or promotion you are allowed to conduct for your funds. Please review our marketing rules under COBS 4 and under PERG 8.

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