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IFPR Exempt CAD MiFID firm FCA prudential category

July 15, 2021

What has happened?

The forthcoming Investment Firm Prudential Regime (the IFPR) is intended by the FCA to simplify and harmonise the capital and liquidity requirements for investment firms but it may present a significant challenge to exempt CAD firms.

What do you need to do?

In view of the Investment Firm Prudential Regime, applicable to MiFID firms and due to go live in January 2022, exempt CAD firms may well wish to review whether they need to remain as exempt CAD and, if not, whether they will be able to, or will wish to, opt out of MiFID via a Variation of Permission.

The FCA’s first Policy Statement paper on the IFPR, PS 21/6, was published in June 2021. The FCA has estimated that it will cost small firms approximately £23,000 and larger firms around £65,000 to implement the changes introduced by IFPR.

There are approximately 600 exempt CAD firms regulated by the FCA and these firms will, if they plan to remain as MiFID firms, need to consider a range of key issues, including;

    • whether or not they will be classed as Small and Non-Interconnected (SNI) firms,
    • the fact that their capital requirement will increase,
    • the need to calculate variable capital such as the Fixed Overhead Requirement (FOR) or K-factor capital,
    • whether they will be in a consolidation group under the new regime and how they will monitor concentration risk,
    • the requirement to produce a risk-based capital assessment, known as an ICARA, which will bring together recovery plans, wind-down plans and many parts of the ICAAP, which exempt CAD firms will not have needed to prepare previously, and
    • being subject to the remuneration code for the first time and needing to put in place relevant policies and governance to comply with the new requirements.

How can we help you?

If you’d like to know more about how we can help you with your planned IFPR or Variation of Permission arrangements, or any other regulatory compliance issues, our expert team is here to help.

Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.