Governance
Strong governance provides the foundation for a well-run brokerage. It helps ensure accountability, supports effective decision-making and enables the business to identify and manage risks before they become significant issues.
The FCA places significant weight on governance because it provides an insight into how the business will operate in practice. A brokerage with clear responsibilities, appropriate oversight and experienced leadership is more likely to deliver consistent customer outcomes and respond effectively as it grows.
Most start-up brokerages will fall within the FCA’s Core SM&CR regime. The FCA expects firms to identify who their senior decision-makers are, what responsibilities they hold and whether FCA approval is required before they can carry out those responsibilities.
Anyone performing a Senior Management Function will require a Statement of Responsibilities (SoR).
This is a concise document setting out the areas for which that individual is accountable. The FCA uses these statements to understand who is responsible for each aspect of the business and to avoid gaps or overlaps in accountability.
Where responsibilities are shared, the arrangements should be clearly explained and documented.
The FCA is not expecting a start-up broker to operate like a large corporate organisation. Governance arrangements should be proportionate to the size and complexity of the business.
For many start-ups, governance may initially consist of a small leadership team supported by regular management meetings, documented decision-making and clearly defined responsibilities. As the business grows, these arrangements can become more formal through enhanced reporting, additional management resource or the introduction of non-executive directors and specialist support.
The regulator is looking for evidence that governance has been considered thoughtfully and that there is sufficient oversight to manage the business effectively from day one.
