Hiring Finance for a Newly Authorised Firm

Authorisation is granted on a date, and the obligations start immediately. That is the difficulty most newly authorised firms discover in their first quarter: the finance function was built for a business that was not regulated, and it is now expected to produce returns, reconcile client money or safeguarded funds daily, calculate capital against a rule, and evidence all of it to a supervisor. The application process demanded a plan; operating under the permission demands a function. This guide covers what changes on day one, when to make the first regulated finance hire, how to bring client money capability in-house, and what the first twelve months should establish.

What changes the day the permission is granted

Four things, and none of them waits for the firm to be ready.

Reporting obligations begin. Returns on the FCA’s RegData calendar in the FCA’s format, with the first submission frequently falling before the finance team has built a process. Our guide to RegData and regulatory reporting covers the mechanics.

Capital becomes a calculated number. Own funds, the applicable requirement, and the obligation to hold enough — monitored continuously rather than reviewed annually. What the calculation looks like depends on the permission: MIFIDPRU for investment firms, a different basis for payment institutions and EMIs.

Client money or safeguarding obligations attach where the firm holds relevant funds. This is the biggest operational change and it is daily — see CASS and client money or safeguarding for payments firms depending on which applies.

And responsibilities become personal. Under the Senior Managers and Certification Regime, prescribed responsibilities are allocated to named individuals, several of which touch finance.

The gap most firms discover

The application was prepared with advisers and described a target operating model. The business then spent the authorisation period building product and raising money, and finance remained what it was — frequently a management accountant, a bookkeeper and an outsourced accountant.

That arrangement can produce accurate management accounts and cannot produce a regulatory return, a capital calculation or a daily client money reconciliation. The gap is not competence; it is that nobody in the building has done this before, and the obligations do not have a learning period.

The practical consequence: firms that plan the finance hire during authorisation rather than after it start considerably better. The permission arrives with a date attached, and a search that starts on that date is already a quarter behind.

When to make the first regulated hire

Three triggers, and the first is the one to act on.

You will hold client money or safeguard funds. This is the clearest case for hiring ahead of authorisation rather than after. The daily reconciliation, the calculation and the acknowledgement arrangements need to work from day one, and building them retrospectively while operating is considerably harder than building them first.

The first return falls within two quarters. Preparing a submission for the first time takes longer than anyone expects, and the data usually does not exist in the form the return requires.

Or the adviser cost is becoming a salary. Firms typically buy the first return and the first capital calculation from a consultancy, which is sensible — and by the third or fourth cycle the arithmetic has usually changed.

Qualification — ICAEW, ACCA or CIMA — is the baseline; regime experience is the differentiator. What the first hire should be depends on scale. Below roughly £5m of revenue, a Financial Controller with regulated experience covering everything is the realistic answer. Above it, an FC plus a dedicated regulatory reporting or client money role. Our guide to the first qualified accountant at a regulated firm covers the wider sequencing.

Bringing client money capability in-house

The hardest single element, and worth treating as its own decision.

The trigger is simple: if the firm holds client money or safeguards funds, it needs someone who has done the reconciliation and the calculation before. There is no version of this that can be learned safely on the job as the sole resource, because the obligation is daily and the consequence of getting it wrong is a shortfall.

What to look for is regime-specific ownership rather than general awareness: which regime, what the calculation involved, what the recurring differences were, what the audit raised. Our guides to CASS 7 versus CASS 15 and the CASS interview questions cover the assessment, and the CASS accountant job description the specification.

What to avoid is the configuration where one capable person prepares the reconciliation, reviews it, maintains the breach register and holds the oversight responsibility. It accumulates rather than being designed, and it is the arrangement most likely to be exposed at audit — our guide to CASS oversight versus operations sets out the proportionate answer for firms that cannot staff both sides.

And the pragmatic middle option: an interim with regime experience to build the process and document it, with a permanent hire running it thereafter. That buys the expertise where it matters most — the design — without carrying the cost indefinitely.

What the first twelve months should establish

The row that matters most is month nine. Newly authorised firms concentrate knowledge in one person faster than established ones, because that person built everything. Documentation is what converts it from a dependency into a process, and it is invariably the thing that slips.

What to tell candidates

Newly authorised firms are a genuinely attractive proposition to the right person, and firms under-sell it. The role involves building rather than maintaining, the finance person is visible to the board and to the regulator, and the experience acquired — standing up a regulated finance function from scratch — is scarce and portable.

Be honest about the other half: the process does not exist, the data is not where it needs to be, and the first year is demanding. Candidates who find that interesting are exactly the ones you want, and the specification that describes it plainly filters out those who do not. Our guide to building a finance function at a regulated firm covers what the build involves.