Orientation

Direct authorisation: what changes in practice

A directly authorised, or DA, mortgage brokerage holds its own FCA authorisation and Firm Reference Number (FRN). Its FCA permissions determine the regulated activities the firm is authorised to carry out. Independent mortgage brokers may choose to become directly authorised or operate as an appointed representative (AR) of a principal firm, depending on how they want to structure their business and regulatory responsibilities.1

FCA authorisation is not a blanket licence. The permission profile must follow the activities in the customer journey, including any protection, later-life, consumer buy-to-let or credit work.

Structural choice

AR or DA? Which route is right for your firm?

There is no universal “better” structure. An AR carries out agreed regulated activities under a principal firm, which accepts regulatory responsibility for activity within the scope of the appointment. A DA firm answers to the FCA in its own right. Direct authorisation brings more freedom, but it also brings additional responsibilities: the brokerage must fund, run and evidence its own control environment.

The FCA points to three situations in which an AR may need to reconsider the relationship: the AR has grown large relative to its principal, conflicts are making oversight difficult, or the two businesses are moving in different strategic directions. Even then, DA should not be treated as a promotion. It is a transfer of responsibility for compliance, liabilities, senior management and the systems needed to run the firm properly.3

Interactive readiness check

How ready is your firm for FCA authorisation?

Direct authorisation is easiest to misjudge when readiness is reduced to qualifications, a business plan and the application fee. The FCA is assessing whether the firm could operate within its permissions from the day authorisation begins. Use this scorecard as a disciplined challenge before commissioning documents or submitting through Connect.

How to use the result

Use the score to decide what needs work next; it is not a substitute for reviewing the FCA’s assessment standard or obtaining specialist advice where needed.

The FCA lens

How the FCA will look at your business

A complete pack is only the starting point. The FCA must be satisfied that the firm will meet, and continue to meet, the Threshold Conditions. These are the regulator’s minimum standards, applied in a way that reflects the nature, scale and complexity of the proposed business.4

Business-model perimeter

What permissions does your brokerage actually need?

A good starting point is the customer journey rather than the permissions themselves. Consider who approaches the firm, how the firm engages with them, which products or services are discussed, who submits the business and what happens after completion. Mapping each stage helps clarify which FCA permissions may be needed.

Questions the application should answer

The FCA expects the regulatory business plan to explain why each requested permission is needed and how it connects to the proposed activities.1 Applying for every possible permission can create questions about competence, resources and whether the firm genuinely understands its model.

Application route

From business model to application

The Connect form should reflect a business model that has already been clearly defined. Start by setting out how the brokerage will operate, then use this to determine the permissions, regulatory requirements, controls and supporting evidence that need to be captured in the application.

After pressing submit

What happens after the application reaches the FCA?

Submission marks the start of the FCA’s assessment process rather than the end of the application journey. Keep the people, systems and supporting evidence behind the application readily available, and assign clear responsibility for coordinating any questions, responses, documents and changes that arise during the review.

For FSMA applications, the FCA’s published assessment period is generally up to six months for a complete application and up to 12 months where an application is incomplete. The FCA has also introduced faster performance targets from January 2026, although the actual timescale will still depend on the quality, completeness and complexity of each application.212

Questions a case officer may explore

These outcomes and the FCA’s expectations for calls, meetings and substantive changes are set out in its current application guidance.2

DownloadCase-officer question and response logTrack owners, deadlines, evidence and submission status.

Application pack

Documents Matter. The links between them matter more.

The FCA’s current mortgage-applicant checklist is extensive. It covers the mortgage supplement, core details, approved-person forms, an IT self-assessment and, where relevant, information about controllers, significant events, owners and influencers or a sole trader. The supporting material ranges from the regulatory business plan and forecasts to Consumer Duty, complaints, vulnerability, conflicts, compliance monitoring, financial crime, technology, competence, remuneration, target-market research, management information and the advice process.8

Policies, processes and oversight should work together rather than sit as separate documents. A policy should shape how cases are handled, that process should create a clear record, and management should be able to see whether the control is operating effectively. This connection between policy, action and evidence is often more meaningful than adding further regulatory wording.

Turn the document list into a controlled register

For each application document, keep a clear record of its owner, current version, approval date, associated workflow and next review date. This helps ensure documents remain current, consistent and aligned throughout the application process.

DownloadApplication document registerTrack ownership, version, approval, evidence links and status.

Core application narrative

Build the regulatory business plan and forecast as one model

The RBP and financial forecasts should work together to present a consistent view of the business. The RBP should explain the assumptions behind the forecast, demonstrate how operational capacity supports expected volumes, and set out the controls in place to manage the risks associated with the firm’s proposition.

A traceable mortgage-broker forecast

Core scenarios to test

• Applications or completions 25% below plan
• Average income per completion lower than expected
• Two-month delay in receiving planned revenue
• Higher cancellation or clawback rate
• PII or compliance cost above budget
• Recruitment delayed while volumes grow
• Key adviser unavailable for a sustained period
• Lead source paused or produces poor-quality cases

The FCA provides a sample business-plan structure and a mortgage-broker financial data template, but expects both to be tailored to the proposed firm.719

DownloadRBP and forecast consistency checkerChallenge volumes, capacity, income, controls and downside assumptions.

Customer outcomes

Consumer Duty: show how the firm will judge outcomes

Where the Duty applies, the FCA expects he application to explain how the brokerage will recognise a good or poor outcome, what information it will review and what it will do when the evidence points to a problem in addition to clear policies set in place. Applicants are encouraged to tailor material covering target markets, product and service governance, fair value, customer-understanding testing and customer-support monitoring.9

For an authorised firm, the priority is to demonstrate that customers are consistently receiving good outcomes. Reviews should highlight where value, understanding or support can be strengthened, set clear follow-up actions and confirm whether those actions have been effective. The results should remain connected to the people, processes and decisions that shape the customer experience.9

What useful mortgage-broker MI might include

A dashboard for broker MI can be particularly useful because it brings key information into one place and creates a clear basis for ongoing oversight and action. Each measure should be clearly defined, linked to a reliable source, assigned to an owner and reviewed at an appropriate frequency, with agreed thresholds for when action is required. Depending on the firm, relevant indicators could include:

• Advice-file QA outcomes and repeat themes
• Customer journey time and stalled-case causes
• Fees by product and customer cohort
• Complaints, root causes and redress
• Vulnerability needs and support outcomes
• Communication testing and comprehension
• Product distribution outside target market
• Introducer quality and conversion anomalies
• Cancellations, declines and lender feedback
• Adviser supervision and competence actions

The FCA’s strategy for mortgage intermediaries highlights several key areas of supervisory focus, including suitability, customer understanding, quality assurance, sales incentives, fees and financial promotions. When assessing fair value, the FCA also makes clear that comparing prices with competitors alone is not sufficient.10

Financial readiness

Beyond the Minimum: The True Cost of Direct Authorisation

Capital resources

The capital calculation depends on the firm’s activities and whether it holds client money or assets. One commonly relevant rule is MIPRU 4.2.11. For a firm carrying on insurance distribution or home-finance mediation, and no other regulated activity, the requirement without client money or assets is the higher of £5,000 and 2.5% of annual income. Where the firm does hold client money or assets for those activities, the figures are the higher of £10,000 and 5% of annual income.13

This calculation is intended as an illustration of one possible scenario. The appropriate figure will depend on the firm’s specific activities and permission set. It can also be helpful to consider whether additional liquidity would support day-to-day operating needs, such as payroll, variations in completion timing, commission adjustments and other business costs.

Professional indemnity insurance

MIPRU 3 sets the relevant PII rules, including cover for the firm and people for whom it is responsible, legal defence costs, continuous cover and Ombudsman awards. Minimum limits are not identical for every intermediary: the Handbook distinguishes, for example, between certain home-finance intermediaries and MCD credit intermediaries, and it also contains rules on excesses and additional capital.14

It is advisable to speak with a PII broker early and provide a clear picture of the firm’s proposed activities. Review the policy’s exclusions, retroactive date, excess and aggregate limit, together with any related capital requirements, to ensure the cover is well aligned with the activities set out in the application.

Plan the full first-year cash requirement

Use the calculator below to build a clearer picture of the firm’s first-year funding needs, including setup costs, ongoing operating expenses and the liquidity buffer it plans to maintain. The editable figures are intended as planning assumptions and can be adjusted to reflect the firm’s circumstances.

For 2026/27, the calculator uses the £2,200 A.0 minimum fee as a planning assumption. The firm’s actual invoice can include other fee blocks and levies, so the live FCA calculation should be checked before relying on it.22

Moving structure

Moving from AR to DA seamlessly

For an AR moving to direct authorisation, securing FCA approval is only one part of the transition. They will also need to plan their exit from the principal arrangement, including contractual notice periods, client ownership, data access, historic liabilities and lender or provider panel arrangements. The FCA also recommends notifying the principal that a reference may be required, agreeing how historic client files will remain accessible and confirming how existing customers will continue to be supported during the transition.3

A 12-week transition plan

Work back from your intended operating date, allowing enough time to align FCA authorisation, contractual notice requirements and commercial onboarding. Confirm dates with customers and counterparties once these key elements are sufficiently established.

Every live case needs an explicit route

The FCA specifically asks firms moving from AR to DA to discuss references, historic client-file access and continued service with the principal. It also notes that authorisation does not override the AR agreement.3

DownloadAR-to-DA transition checklistPlan owners, dependencies, target dates and evidence across the transition.

Day two and beyond

Running your firm after FCA authorisation

Once authorised, the focus shifts to maintaining strong oversight and consistent standards across the business. This includes customer outcomes, case records, marketing, financial resilience and keeping your permissions aligned with the activities your firm carries out.

The FCA’s decision marks the end of the application process, but the firm’s regulatory responsibilities continue. Once authorised, the firm must continue to meet the Threshold Conditions and the requirements that apply to its activities. This includes maintaining appropriate resources and PII where required, overseeing advisers, monitoring customer outcomes, managing complaints and financial promotions, responding to changes in the business, and completing required FCA notifications and regulatory returns on time.

A sensible post-authorisation calendar

The compliance timetable will differ from one firm to another. It should reflect the firm’s permissions, fee blocks, reporting requirements, SM&CR category, legal structure and the activities it actually carries out. A generic compliance calendar can be a useful starting point, but the final schedule should be tailored to the firm’s specific obligations.

Your First 90 Days as a Directly Authorised Firm

Build RMAR reporting into your compliance routine

Firms with home-finance mediation permissions may need to complete the relevant sections of the Retail Mediation Activities Return. The FCA lists sections covering financials, capital or resources, PII, training and competence, product data and fee information. Most applicable sections are reported at least twice yearly, with deadlines linked to the accounting reference date.18

The FCA directs newly authorised firms to Connect for applications and notifications, RegData for regulatory returns and online invoicing for fees.16

DownloadFirst 90 days compliance calendarAssign access, reporting, monitoring and review tasks from day one.

Operating evidence

How FCA Expectations Translate into Mortgage Case Evidence

A policy sets the expectation, while the case record shows how it was applied. The example below illustrates how each stage of the customer journey can create a clear evidence trail of the advice given, the decisions made and the reasons behind them.

The control-to-evidence test

1. Named owner
2. Required action
3. Timestamped record
4. Review
5. Exception
6. Remediation

DownloadMortgage case evidence mapMap each stage to its owner, record, review and management information.

Growth with control

Marketing, introducers and lead generation after direct authorisation

Direct authorisation gives the firm greater control over how it markets its services and generates business. It also means taking direct responsibility for financial promotions, record keeping and customer outcomes. Introducers and purchased leads should therefore be considered as part of the wider customer journey, with clear oversight of how customers are attracted, referred and supported.

Financial-promotion control

• Identify whether the communication is a financial promotion
• Use the relevant MCOB, CONC or ICOBS rules for the activity
• Present secured-lending risks prominently with benefits
• Keep a copy of every approved version and where it appeared
• Check landing pages, forms and follow-up messages as one journey
• Ensure key information is clear and meaningful to customers, rather than relying solely on disclosure wording.
• Control affiliates, introducers and people posting on the firm’s behalf
• Record withdrawal, correction and reapproval when content changes

Introducer and lead-source due diligence

The FCA places emphasis on financial promotions and customer communications that are clear, fair and easy to engage with. Its mortgage intermediary strategy also highlights fair value, incentives, financial promotions and customer understanding as key areas of supervisory focus.2010

Application quality

What Can Hold Up an FCA Mortgage Broker Application?