The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime. This is FCA's second policy statement on the investment firms regime and it aims to streamline the prudential requirements for solo-regulated investment firms in the UK (FCA investment firms). The new regime represents a major change for FCA investment firms and is expected to take effect in January 2022, subject to the Treasury making the necessary secondary legislation under the Financial Services Act. FCA intends to publish another consultation sometime in the beginning of August, followed by a policy statement summarizing the feedback received and bringing together all the final rules in the fourth quarter of 2021.
This policy statement follows CP21/7, the feedback period for which ran from April 19, 2021 to May 28, 2021. In this consultation, FCA had sought views on the remaining aspects on own funds requirements (such as the Fixed Overheads Requirement), the basic liquid assets requirement, the remuneration requirements, the Internal Capital and Risk Assessment (ICARA) process, and the draft reporting and notification templates. The policy statement addresses the feedback received with respect to the the liquid assets requirement reporting (MIF007), the ICARA process reporting (MIF007), group capital test reporting (MIF006), remuneration reporting (MIF008), and proportionality, among others. FCA received 63 responses to CP21/7, with most respondents supporting the proposals. In some cases, respondents requested clarifications on the application of rules, though, in a small number of cases, they opposed the proposals or suggested changes to the proposed rules.
In general, FCA has implemented the proposals as consulted on while making amendments to provide more clarity in response to some of the feedback received. As the near-final legal instrument does not differ significantly from the version in CP21/7, FCA considers that the original cost-benefit analysis remains appropriate. Appendix 1 of the policy statement presents the near-final text of the Investment Firms Prudential Regime Instrument 2021. This instrument is expected to come into force on January 01, 2022, with certain exceptions that come into force on December 01, 2021.
Keywords: Europe, UK, Securities, IFPR, Investment Firms, Regulatory Capital, Reporting, Liquidity Risk, Proportionality, ICARA, K-Factor Regime, FCA
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