FCA firms: critical functions you can outsource, not offload

Key takeaways

When an FCA-regulated firm is outsourcing critical or important functions, it keeps full responsibility for them. SYSC 8 expects the firm to keep the expertise to supervise the provider, to avoid weakening internal control, and to keep the FCA able to monitor. Material outsourcing should be notified to the FCA in advance. Senior managers stay personally accountable.

• The firm keeps full regulatory responsibility.
• Keep the expertise to supervise and challenge the provider.
• Notify the FCA before material outsourcing.
• Senior managers stay accountable under SM&CR.

What is a critical or important function?

Broadly, a function where a defect or failure would materially impair the firm's continuing compliance, its financial performance, or the soundness or continuity of its regulated services. Advice, client money handling and complaint decisions often qualify. Many admin tasks, such as data entry or document chasing, usually do not, but test each one.

• Which business processes should you never outsource?
• Regulated processes: outsource the work, keep the duty

What must stay in-house?

Even when the work moves, these stay with the firm.

• Responsibility for regulatory compliance.
• Senior manager accountability.
• Expertise to supervise and assess the provider.
• Decisions on advice, suitability and complaints.
• Access for the FCA to data and premises.

• The intelligent client: know enough to manage a provider
• You can outsource the work, never the accountability

What does SYSC 8 expect of the contract?

Clear service standards, the right to monitor and audit, access for the regulator, data security, business continuity, sub-outsourcing controls and the ability to exit without disruption. SYSC 8 applies in full to some firms and as guidance to others, so check which applies to yours.

• Contract clauses that keep control with you
• BPO business continuity: planning for disruption

What can a small regulated firm outsource safely?

Administrative support around regulated activity: case admin, document collection, data entry, chasing lenders or providers, diary management and file checks against a list. Advice, sign-off and customer outcome decisions stay with authorised people in the firm.

• Mortgage broker admin outsourcing: case admin that moves
• What a financial adviser or broker should never outsource

What does this look like in practice?

A pattern we see: brokers outsource case admin successfully once they draw a clear line between admin and advice, document the oversight and keep file sign-off with an adviser.

• See client work
• BPO Solutions for UK businesses

Regulated outsourcing checklist

• Assess whether each function is critical or important.
• Keep supervision expertise in-house.
• Check which SYSC 8 rules apply to you.
• Notify the FCA of material outsourcing.
• Document oversight and review it yearly.

• Business phone numbers: keep them in your name
• Director duties: what you can delegate and what you cannot

Next step

List the tasks you want to outsource and mark which touch advice, client money or customer outcomes. Those need the most care; the rest are often straightforward.