Featured Product

    FCA Launches Third Consultation on Investment Firms Prudential Regime

    August 06, 2021

    The Financial Conduct Authority (FCA) is consulting (CP21/26) on the third set of proposed rules to introduce the Investment Firms Prudential Regime (IFPR), for which the comment period ends on September 17, 2021. This consultation, which accompanies the proposed forms for MIFIDPRU 8 Disclosure templates, seeks views on certain aspects of disclosures, own funds, technical standards, depositaries, the Handbook changes to reflect changes to the UK resolution regime, other consequential changes to Handbook, and the use of new powers introduced under Part 9C of the Financial Services and Markets Act 2000. Post this third consultation, FCA will publish, in Autumn 2021, the Policy Statement and final rules for the IFPR regime.

    This third consultation follows the first consultation that introduced the UK IFPR and focused on the categorization of investment firms, prudential consolidation, own funds and aspects of own funds requirements, and reporting and the second consultation that focused on the remaining aspects of own funds requirements, liquidity, risk management, governance, remuneration, applications, and notifications. The following are the key highlights of the proposals in CP21/26:

    • Investment firms that are not small and non-interconnected should disclose, with respect to MIFIPRU 8, information about their risk management and governance arrangements and about their own funds, own funds requirements, and investment policy. FCA proposed for these firms to disclose information, such as the value of different types of capital that they hold, that they are providing to FCA in regulatory returns or that they will have collated for their own risk management requirements. 
    • Any small and non-interconnected firm that has issued additional tier 1 instruments should disclose information about their risk management arrangements and all FCA investment firms must make qualitative and quantitative disclosures on their remuneration policies and practices that are in proportion to the size and type of firm.
    • FCA proposed a rule to address the situation where excess drawings can be made by partners in a partnership or members in a limited liability partnership without being recorded as a loss and is, instead, treated as a loan to partners or members.
    • FCA proposed that firms should apply the onshore technical standards with specific modifications that are set out in MIFIDPRU, the prudential sourcebook for the Markets in Financial Instruments Directive, or MiFID, investment firms; these modifications are included in MIFIDPRU so that the binding technical standards work in the way they should with the IFPR.
    • The consultation outlines the changes that are proposed to make the FCA Handbook reflect changes related to the application of resolution regime to investment firms. Earlier in 2021, the HM Treasury consulted on its proposal to remove FCA investment firms from the scope of the resolution regime in UK. In June 2021, the Treasury’s feedback confirmed that these firms would no longer be subject to this regime. 
    • FCA proposed to amend the requirements that depositaries must meet so that they no longer have to have permission to deal on own account. The proposals include a small increase in the minimum own funds requirement for firms that act as the depository of an unauthorized Alternative Investment Fund from EUR 730,000 to GBP 750,000. FCA also proposed to allow other FCA investment firms to act as a depositary where they provide the MiFID ancillary service of safekeeping and administration of financial instruments.

    The draft legal rules of FCA in this consultation also include certain non-material additions and amendments to the text from the previous consultations, such as updating cross-references and terminology. FCA proposed some consequential changes to the Handbook and the Handbook Glossary. The proposals also cover how to make use of the new powers as a result of introduction of Part 9C of Financial Services and Markets Act 2000 (FSMA). The proposed rules will apply to any MIFID investment firm currently subject to any part of the Capital Requirements Directive and Regulation (CRD and CRR), the depositaries, the Collective Portfolio Management Firms (CPMIs), and the regulated and unregulated holding companies of groups that contain an investment firm authorized and regulated by FCA and that is authorized under MiFID and/or is a CPMI. The consultation paper CP21/26 should be read in conjunction with PS21/6 (June 2021) and, PS21/9 (July 2021).

     

    Related Links

    Comment Due Date: September 17, 2021

    Keywords: Europe, UK, Securities, Investment Firms, IFPR, Reporting, MiFID, Resolution Regime, MifIDPRU, Disclosures, Regulatory Capital, FCA

    Featured Experts
    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7494