With a month to go until the Investment Firms Prudential Regime (IFPR) starts to apply on 1 January 2022, the FCA has published its final policy statement (PS21/17). PS21/17 contains final rules and feedback to the FCA's third consultation on IFPR, CP21/26. The FCA has made some relatively minor adjustments and clarifications and affected firms should consider how to factor in these changes within their IFPR implementation.
The FCA reminds firms that:
- They should return the answers to the questionnaire sent out by the FCA on 12 November 2021. The questionnaire requests various key information, such as their expected SNI status, investment firm group membership/composition and expected ICARA reporting date.
- Firms under Transitional Provision 5 Advance Data Collection (TP 5) in the Prudential Sourcebook for MiFID Investment Firms (MIFIDPRU) must begin collecting data on K-factor metrics that are relevant to the activities they undertake by no later than 1 December 2021.
This briefing provides a high-level overview of PS21/17. For a summary of the proposals in CP21/26, please see our general briefing on CP21/26 here. Our focused briefing on remuneration also discusses the proposals in CP21/26 relating to remuneration disclosures.
Note that the final rules that relate to CP21/26 are found in Appendix 1 to PS21/17. The text of the final consolidated IFPR rules can be viewed in the online FCA Handbook. (Select the 'show timeline' function and set the version date to 1 January 2022. The text of the new MIFIDPRU sourcebook will be contained in the Prudential Standards block. The text of the MIFIDPRU Remuneration Code (SYSC 19G) will be contained in the SYSC sourcebook in the High Level Standards block.)
Overview of key changes in PS21/17 versus CP21/26
The FCA considers these in
| Disclosure | Changes to the original proposals include amendments to the level of application of the disclosure requirements, clarification of when firms must publish their first set of disclosures under the new regime and the introduction of exemptions from the requirement to disclose quantitative remuneration data. |
| Own funds – excess drawings by partners and members | The FCA is going ahead with its proposals in CP21/26 that:
The CP confirms that the FCA's intention is to achieve the same result for all FCA investment firms under the IFPR as required under the existing provision for BIPRU firms in GENPRU 2.2.100R. |
| Technical standards | With respect to onshored UK equivalents of relevant EU-derived binding technical standards (BTS), the FCA confirms that, on the whole, firms should apply onshored BTS that are relevant under the IFPR with specific modifications. The modifications are reflected in the amendments to MIFIDPRU that cross-refer back to the corresponding BTS. In a few cases, the FCA has directly copied out the technical standard provisions, with modifications, directly into MIFIDPRU. |
| Depositories | Depositaries for various types of investment funds that are also FCA investment firms should consider the potential for harm arising from their depositary activities as part of their internal capital adequacy and risk assessment process under MIFIDPRU 7. FCA investment firms that act as depositaries cannot generally be considered small and non‑interconnected (SNI). |
| UK resolution regime | 730k FCA investment firms will no longer be subject to the UK resolution regime which implemented the Banking Act 2009. These firms will still be subject to the FCA's existing rules, legislation and processes to facilitate orderly wind-down, the Investment Bank Special Administration Regime (IBSAR) and the new IFPR rules. |
| Other
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What next?
By no later than 1 December 2021: Firms under TP5 must begin collecting data on K-factor metrics that are relevant to the activities they undertake
Early December 2021: MiFIDPRU notification forms available
1 January 2022: IFPR applies
By 1 January 2022: Non-CRR firms to have notified FCA of eligibility of pre-MIFIDPRU capital to be treated as own funds under MIFIDPRU 3
By end of January 2022: Firms wishing to use the Group Capital Test (GCT) on a temporary basis for up to two years, pending permission granted by the FCA, must submit an application for GCT before the end of January 2022
By 1 February 2022: Existing CRR firms and their parents holding Additional Tier 1 capital instruments issued before 1 January 2022 to have notified FCA of their intended use of those existing capital instruments under MIFIDPRU
Q3/Q4 2022: FCA consultation on ESG disclosures
2023: Most firms with performance periods of 12 months to make first MIFIDPRU remuneration disclosures
Until 2027: Transitional arrangements or phase-in periods, in some areas lasting up to five years, will be available to certain firms
HSF publications
Our previous publications on IFPR can be found below:
- A Guide to FCA Policy Statements and Final Consultation on IFPR (1 September 2021)
- HSF Guide to IFPR Remuneration Rules (1 September 2021)
- Investment firms take note: FCA publishes second IFPR consultation (21 April 2021)
- HM Treasury consultation on IFPR implementation and Basel 3 standards (16 February 2021)
- FCA publishes first consultation paper on Investment Firm Prudential Regime (16 December 2020)
- First steps taken on new UK prudential regime for investment firms (25 June 2020)
- Impact of IFD/IFR on Remuneration Provisions for Investment Firms (29 January 2020)
- EU Investment Firms Directive and Regulation: Overview of New Prudential Regime for 2021 (30 January 2020)
- Q&A for Asset Managers (30 January 2020)
Key contacts
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.