Regulatory incubator

A regulatory incubator, also known as a regulatory umbrella, is a firm that supports start-up businesses through the initial regulatory phase until they can be directly regulated in their own right. The process is not dissimilar to that of business incubators. However, the primary focus for a regulatory incubator in the UK is on providing services directly linked to the requirements of the financial regulator, the Financial Conduct Authority.
The Financial Services and Markets Act 2000 stipulates that no person can conduct regulated activity in the UK without being authorised or an ‘Exempt Person’ under the Act. An individual can be exempted by becoming an ‘Appointed Representative’ of an authorised firm, also known as a ‘Principal’.

As such, a client becomes an “appointed representative” of the incubator, which accepts responsibility for all of its regulated activities.. The incubator might also provide advice and support on marketing, training, human resources and branding as well, helping companies to gain competency and prove their business models to a regulator. It means that entrepreneurial companies can start operating without having to wait for direct authorisation by a regulator but remain strictly supervised both as a corporation and as individual persons.
Regulatory incubation began in the UK in 1999. Sturgeon Ventures, a London-based company that was founded in 1998 as a family office, offered regulatory shelter under its own authorisation by the UK regulator at that time, the Financial Services Authority. The company subsequently registered the term as a trademark.
However, the business model has been more widely adopted since then. Other established regulatory incubators, or umbrellas include: Midmar Capital, Gallium Fund Solutions, Mirabella Financial Services and Linear Investments. These firms are also known as FCA Umbrella or Regulatory Hosting Platforms.
The concept of regulatory incubation became popular in London in the wake of the financial crisis, when many individuals left established City corporations to set up their own enterprises but needed supervisory support and proof of concept in their own businesses before becoming directly authorised with their companies.<ref name=tenfold/>

Main Menu

See Also

Main Menu