What Is an FCA VREQ? Voluntary Requirements Explained

A VREQ — a voluntary requirement — is one of the FCA’s everyday supervisory tools, and one that owners, boards and senior leaders of regulated firms increasingly encounter. It is far more common than formal enforcement, and far less widely understood. For a board or a new owner seeing the term for the first time, often in a letter from the regulator, it can read as more alarming than it usually is. This explainer sets out what a voluntary requirement actually is, where it sits among the FCA’s powers, how firms typically arrive at one, what it means in practice for the firm, its senior managers and its owners, and what separates the firms that handle one well from those that do not. It is written for the strategic reader — the chair, chief executive, owner, investor or general counsel weighing what a VREQ means for the business — rather than as a step-by-step operational manual.

For the practical side of responding — how to keep the regulated functions covered, the options for interim and permanent senior cover, and how quickly that can be arranged — see our companion Knowledge Centre guide, Interim SMF16/SMF17 Cover During an FCA VREQ.

Most boards first hear the term “VREQ” at a moment of some stress — usually in correspondence from the regulator. It sounds more alarming than it often is. A voluntary requirement is, in the great majority of cases, a managed and recoverable path rather than the start of enforcement. What matters is responding to it credibly and quickly — and, almost always, that includes making sure the right compliance and MLRO leadership is in place to drive the response.

Adrian Lawrence FCA — Founder, Exec Capital — ICAEW Verified Fellow, holding an ICAEW practising certificate in his own name — ICAEW-Registered Practice — Companies House no. 15037964

What a voluntary requirement actually is

A VREQ is a requirement that a firm agrees to accept on its regulatory permission. Rather than the FCA imposing a requirement on its own initiative, the firm volunteers to be bound by it, typically by applying for its permission to be varied to include the requirement. In practice the two routes — a voluntary requirement and an imposed one — reach a similar place: a binding obligation or restriction on what the firm may do. The difference lies in how they come about. A voluntary requirement reflects the firm working with the regulator to agree terms, which is generally the stronger position to be in.

A requirement is not the same as a limitation on a firm’s permitted activities in the abstract; it is a specific, often time-bound, obligation attached to the firm’s permission. It can require the firm to do something, to stop doing something, or to refrain from doing something without the regulator’s prior non-objection. The common thread is that it gives the FCA a clear, enforceable line around the firm’s conduct while a concern is addressed.

Where a VREQ sits among the FCA’s powers

The FCA has a graduated set of tools for dealing with concerns about a firm, and a VREQ sits in the supervisory part of that spectrum rather than the enforcement part. At the lighter end are information requests and supervisory correspondence. In the middle sit requirements — voluntary (a VREQ) or own-initiative (an OIREQ) — and independent skilled-person reviews. At the far end sits formal enforcement action, which is a different process with different consequences. Understanding that a VREQ is a supervisory instrument, not a penalty, is the single most useful piece of context a board can hold on to: it is a mechanism for containing and fixing a problem, not a judgment that the firm has failed.

How firms usually arrive at a VREQ

A voluntary requirement rarely appears without warning. The path that leads to one is usually recognisable. It often begins with the regulator gathering information — a request for documents and explanations, sometimes referred to by its statutory basis as a section 165 request — prompted by routine supervision, a regulatory return, a complaint, a whistleblowing report, a market event or a thematic review. That is frequently followed by a feedback letter in which the FCA sets out its concerns and its expectations. Where those concerns are material, the regulator may look for a requirement on the firm’s permission to contain the risk while it is addressed — and, if the firm agrees, that becomes a VREQ. In more serious cases the FCA may also commission an independent skilled-person review, known by its statutory basis as a section 166 review, under which a qualified third party reports on defined aspects of the firm.

For a board, the value of recognising this sequence is that it gives an early read on how serious the situation is and how fast it needs to act. A firm that is still at the information-request stage has more room than one that has received a proposed requirement, and a firm facing both a VREQ and a skilled-person review is in a more demanding position again.

What typically triggers a VREQ

VREQs cluster around a recognisable set of themes. The most common include weaknesses in systems and controls; financial-crime concerns spanning anti-money-laundering frameworks, customer due diligence, sanctions and the documentation of source of wealth and source of funds; client-asset and client-money handling; conduct and customer-outcome issues, including matters now framed through the Consumer Duty; governance and oversight failings; and — a recurring theme for smaller and newly acquired firms — questions about whether the firm is being effectively managed and controlled from the UK. A single trigger can be enough, but often it is a combination, and a gap in senior compliance leadership can turn a contained concern into a broader one.

Voluntary versus own-initiative: why the distinction matters

Where a firm agrees to a requirement, it is voluntary; where the FCA imposes one using its own powers, it is an own-initiative requirement. The practical effect on the firm can be similar, but the difference in tone and standing is real. A voluntary requirement signals cooperation, allows the firm to negotiate the scope and duration, and tends to be less damaging to the firm’s reputation and its relationships with clients, counterparties and banking partners. A firm that engages early, takes credible advice and has the right people in post is far better placed to keep a requirement voluntary, proportionate and time-limited. A firm that cannot demonstrate it has its house in order has less room to negotiate and a higher risk of an imposed, broader requirement.

What a VREQ means for the firm

For the firm, a VREQ means operating within the agreed boundaries, delivering any required remediation to an agreed timetable, and keeping the regulator informed of progress. The boundaries vary widely. Some VREQs are narrow and barely affect day-to-day business; others restrict whole categories of new business while allowing the firm to continue servicing existing clients; a few are more far-reaching. A well-advised firm will often seek to shape a limited and temporary requirement — one that protects against the specific risk the regulator is worried about while preserving the firm’s ability to serve its existing clients and continue operating — rather than accept a blanket restriction that damages the business and its customers unnecessarily.

There is also a reputational and disclosure dimension to weigh. Depending on the nature of the requirement, it may appear on the public register, and the firm will need to think carefully about communications with clients, counterparties and partners, in a form and manner appropriate to its obligations. Handled with discipline, a VREQ is a defined period of focused work that ends with the firm’s footing restored. Handled poorly — with drift, weak governance, or gaps in senior accountability — it can escalate.

What it means for senior managers

Under the Senior Managers and Certification Regime, named individuals carry personal accountability for designated functions, including compliance oversight (SMF16) and money-laundering reporting (SMF17). In a VREQ situation those roles become pivotal: they are the firm’s primary interface with the regulator on the matter, the owners of much of the remediation, and the people whose competence and conduct the FCA will be assessing. That personal accountability is also why supervisory events so often coincide with compliance and MLRO resignations — the exposure feels most acute precisely when the firm most needs continuity. A vacancy in either function during a live matter is a serious problem, because it undermines the firm’s ability to show it is being managed and controlled at exactly the moment that question is being asked.

What it means for owners, controllers and investors

For an owner, controller or investor, a VREQ is both an operational and a strategic matter. A new owner who has recently acquired or taken control of a regulated firm may inherit a supervisory matter rather than create one — and then has to demonstrate effective management and control at precisely the moment the regulator is questioning it. The quality of the firm’s senior compliance leadership becomes part of the owner’s own credibility with the regulator. There are deal and value implications too: an unresolved supervisory matter, or a requirement that restricts the business, can affect valuation, financing, onward transactions and the appetite of banking and counterparty relationships. For an owner, investing early in credible senior cover and a clear remediation plan is not a cost centre — it is how the value of the asset is protected and the path back to growth is reopened.

What separates firms that handle a VREQ well

The firms that come through a voluntary requirement in good shape tend to share a few characteristics. They engage early and constructively with the regulator rather than defensively. They take credible legal and compliance advice and let the skilled person and counsel lead the regulatory strategy. They are realistic about the issues and resource the remediation properly. And — the point most often underestimated — they make sure the SMF16 and SMF17 functions are held by credible, accountable people for the duration, rather than leaving them thinly covered or vacant. A board that treats a VREQ as a project to be led, with the right people in the right seats and a clear plan, is in a fundamentally different position from one that treats it as a problem to be weathered.

The senior-leadership dimension — and how Exec Capital helps

A firm’s response to a VREQ is led by its board, its legal counsel and, where relevant, its skilled person and compliance consultancy, who own the remediation and regulatory strategy. Running underneath all of that is a recruitment question that is often the most time-critical of the lot: making sure the SMF16 and SMF17 functions are held by credible, regulator-acceptable people for the duration — usually an interim to bridge the immediate gap, then a permanent appointment as the firm moves back towards growth.

That is where Exec Capital fits. We can find candidates at short notice with the right experience — approved SMF16 and SMF17 holders and senior financial-crime operators, many immediately available and experienced in live FCA supervisory and VREQ environments — verify their recent approvals against the FCA Register, sense-check conflicts and availability up front, and help the board structure the cover sensibly, including pairing an approved SMF holder with a hands-on financial-crime lead where that gives the firm approved cover from day one. Because we work from an existing, pre-qualified network rather than a cold search, credible names can be in front of a board within days. Every mandate is led personally by Adrian Lawrence FCA. For the detailed mechanics, day-rate ranges and engagement models, see the companion guide: Interim SMF16/SMF17 Cover During an FCA VREQ.

Lost your SMF16 or SMF17 during a VREQ?

We can find candidates at short notice with the right experience to step into a live FCA supervisory situation — interim cover available quickly, with the permanent appointment run in parallel. Every mandate led personally by Adrian Lawrence FCA.

0203 834 9616

Tell us about your requirement →

Frequently asked questions

What does VREQ stand for?

VREQ stands for voluntary requirement — a requirement a firm voluntarily agrees to accept on its FCA permission, generally in place of one the regulator would otherwise impose.

Is a VREQ the same as enforcement action?

No. A VREQ is a supervisory tool used to contain a risk and drive remediation while a firm continues to operate within agreed limits. Enforcement is a separate, more serious process. A VREQ is best understood as a managed, recoverable path rather than a penalty.

What is the difference between a VREQ and an OIREQ?

A VREQ is agreed to by the firm; an own-initiative requirement (OIREQ) is imposed by the FCA using its own powers. Both bind the firm to similar effect, but the voluntary route signals cooperation, can be negotiated, and tends to be less damaging to the firm’s standing.

Why would the FCA issue a VREQ?

Usually because it has identified a concern — about systems and controls, financial crime, client assets, conduct, governance or management and control — that it wants contained while the firm fixes it. The requirement gives the regulator a clear, enforceable boundary during that period.

Can a firm keep trading under a VREQ?

In most cases yes, within the agreed boundaries. Many VREQs are deliberately shaped to allow a firm to keep servicing existing clients while restricting specific new activity, so that the business and its customers are protected while remediation is carried out.

How long does a VREQ last?

It varies. Some are short and tied to a specific remediation milestone; others remain in place until the regulator is satisfied the underlying issues are resolved. A well-advised firm will usually seek a proportionate, time-limited requirement rather than an open-ended one.

Does a VREQ appear on the public register?

Depending on its nature, a requirement may be reflected on the public register, which is one reason firms weigh communications and disclosure carefully. The specifics should be handled with legal counsel.

How does a VREQ affect a sale, acquisition or investment?

An unresolved supervisory matter or a restrictive requirement can affect valuation, financing, onward transactions and counterparty relationships. For buyers and investors it is a key diligence item, and for a new owner it makes credible senior compliance leadership and a clear remediation plan especially important.

What should a board do first when it receives a VREQ?

Engage credible legal and compliance advice, understand precisely what the requirement does and does not permit, make sure the SMF16 and SMF17 functions are credibly covered, and put a clear, resourced remediation plan in place. The strategic detail belongs with counsel and the skilled person; the senior-cover question is one we can help with immediately.

What Is an FCA VREQ? Voluntary Requirements Explained