Investment Firms Prudential Regime (IFPR)
The FCA’s Investment Firms Prudential Regime (IFPR) will introduce a single prudential regime for all MiFID firms regulated by the FCA. It establishes a risk-based approach that focuses on capturing any risks arising from the firm’s activities that could pose threats to its clients and the markets in which it operates.
The Investment Firms Prudential Regime will apply to the following firm types;
- MiFID investment firms authorised and regulated by the FCA,
- Collective Portfolio Management Investment Firms (CPMIs), and
- Regulated and unregulated holding companies of groups that contain either of the above.
The new regime represents a major change for these firms and the FCA considers it critical they adequately prepare for the regime, which will come into force on 1 January 2022.
The MiFID firm types BIPRU, IFPRU and exempt CAD will cease to exist and all MiFID firms will then be categorised as either SNI (small and non-interconnected) firms or as non-SNI, depending on the regulatory activities they carry out and the financial thresholds they meet.
There are a series of permission-based and quantitative thresholds for firms to determine if they are an SNI or a non-SNI firm. Firms with permission to deal on own account or to carry out underwriting and/or placing on a firm commitment basis cannot be an SNI. The quantitative thresholds are set out below.
These thresholds, with the exception of the on- and off-balance sheet total, only relate to the MiFID activities undertaken by the firm. A firm may manage assets without undertaking portfolio management or ongoing investment advice under MiFID or hold client money or client assets in relation to non-MiFID activities. These should be excluded from the threshold measurement.
In October 2021, the FCA made its final rules to streamline and simplify prudential requirements for solo-regulated UK MiFID firms.
It has converted the near-final rules from the first two policy statements into final rules and it will publish a third policy statement by the end of 2021. It has also published an updated version of its general guidance on the application of ex-post risk adjustment to variable remuneration, which brings FCA investment firms into scope of the guidance.
Also now available are:
- a Remuneration Policy Statement template which FCA investment firms can use to document their remuneration policies and practices, and
- a template which FCA investment firms can use to record their material risk takers
For more updates and information, firms can sign up for the Investment Firms Prudential Regime newsletter by emailing IFPRemail@example.com with ‘sign up’ in the subject line.
The FCA will be sending out a questionnaire to all existing FCA investment firms in November 2021 asking for various key information, such as their expected SNI status, investment firm group membership/composition and expected ICARA reporting date. This will provide the information that the FCA needs to set up reporting schedules and update its systems.
The FCA will provide updates on this questionnaire on its IFPR webpage and as part of the monthly Regulation Round-up.
Investment Firms Prudential Regime (IFPR) Download
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