UT-2024-000094 - [2025] UKUT 00082 (TCC)

This Threshold Condition requires that “The resources of A must be appropriate in relation to the regulated activities that A carries on or seeks to carry on.” Where, as here, the only activities that an applicant seeks to carry on are relevant credit activities, “A has adequate financial resources if A is capable of meeting A’s debts as they fall due”.

As to whether A has appropriate non-financial resources, sub-paragraph 2D(4) provides:

“(4)

The matters which are relevant in determining whether A has appropriate non-financial resources include—

(a)

the skills and experience of those who manage A’s affairs;

(b)

whether A’s non-financial resources are sufficient to enable A to comply with—

(i)

requirements imposed or likely to be imposed on A by the FCA in the exercise of its functions, or

(ii)

any other requirement in relation to whose contravention the FCA would be the appropriate regulator for the purpose of any provision of Part 14 of this Act.”

As to the Applicant’s financial resources, Mr Macdonald submits that the Authority was unable to confirm if the Applicant satisfied the general solvency requirement due to the Applicant’s failure to respond to the Information Request. Moreover, the financial information that was provided by the Applicant was incomplete, contained only future projections, and did not indicate the Applicant’s current assets or liabilities.

On 12 October 2023, the Applicant sent the Authority some financial projections. There were no historic or current period figures, just a three-year forecast, which showed rising revenue (all from non-financial services sources), constant expenses and consequently rising profits. The Applicant was projected to retain earnings of £20,000 a year (giving cumulative retained earnings of £60,000 by the end of year three) and have a £5,000 share capital. In the Information Request, the caseworker asked the Applicant to explain how it would meet the £5,000 financial resources requirement. She asked for no other financial information/analysis (for example, she did not ask how profits/income would rise whilst expenditure stayed constant or more generally what the Applicant had based its projections on or whether they were just a “finger in the air”). The projections showed £5,000 of share capital being injected, which would (of course) be sufficient to meet the financial resources requirement. Given that the Applicant had supplied projections which answered the only question the caseworker asked about financial resources and that no other questions/issues had been raised with the Applicant about its financial resources, we do not consider that the Authority’s conclusion that it was not satisfied about the Applicant’s financial resources was one that was reasonably open to it.

As to the Applicant’s non-financial resources, Mr Macdonald says that:

In the Information Request, the Authority asked the Applicant “Please could you kindly revisit the compliance monitoring plan paying attention to the following: identifying the relevant risks and rules, identification of financial crime, conflicts of interest, the monitoring of the firms prudential resource requirement and the approach to root cause analysis”. The caseworker identified key issues to be addressed in the compliance monitoring plan.

The Information Request went on to discuss suitability. The caseworker explained that she understood that “the firm is not a lender, however it still needs to ensure the credit broking performed is not unsuitable for the customer. In light of this please describe any measures in place to mitigate the risk of unsuitable sales such as fact find, income/expenditure assessment etc and how this is built into the sales process. Please also describe the process by which finance is offered. How are sales pitched?”

The Applicant has not provided this information, or indeed any other information addressed in the Information Request. It has clearly not done anything that might even begin to satisfy the Authority that it has the non-financial resources it needs to identify and deal with these obligations.

For these reasons we are satisfied that the Authority’s conclusion that it was not satisfied that the Applicant had appropriate resources in relation to the regulated activities that it sought to carry on (the Appropriate Resources Threshold Condition), was one which was reasonably open to it.