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    HMT Proposes Rule Changes Resulting from New Investment Firms Regime

    June 28, 2021

    HM Treasury, also known as HMT, published a draft statutory instrument to amend the Financial Services and Markets Act 2000 (PRA-regulated Activities) (Amendment) Order. This amendments in this statutory instrument will be a result of introduction of the Investment Firms Prudential Regime (IFPR). The draft instrument is still in development. The drafting approach, and other technical aspects of the proposal, may change before the final instrument is laid before Parliament. HM Treasury plans to lay this instrument before the UK Parliament prior to the end of 2021. The statutory instrument is expected to come into force on January 01, 2022.

    The existing Order allows PRA to choose to designate any investment firm that fulfils two criteria: dealing in investments as principal and being subject to the initial capital requirement of EUR 730,000. The IFPR will make the initial capital requirement of EUR 730,000 obsolete, as it will create new initial capital requirements for investment firms. Therefore, the reference to the initial capital requirement of EUR 730,000 is being removed by the statutory instrument. The statutory instrument makes changes to the Order to allow PRA to continue to designate systemic investment firms after the IFPR is introduced. Article 2(3) of the statutory instrument makes changes, which allow for all investment firms that deal in investments as principal to be eligible for designation by PRA. This does not mean PRA will necessarily designate all of these investment firms. When designating investment firms, PRA will continue to have regard to its statutory objectives, the assets of the person or group, and its Statement of Policy on designation. The statutory instrument also makes minor technical changes, including the following:

    • Clarifies the meaning of "FCA controlled function" and "PRA controlled function."
    • Removes the requirement for PRA to consult BoE before issuing a new designation statement of policy. PRA and BoE consider this requirement can be deleted as it does not reflect their current structures, because PRA is now a part of BoE.
    • Clarifies that, where FCA has given its approval in relation to a particular function, such an approval should be deemed to be given by PRA. This means that the authorized persons do not need to re-apply for approval when a firm they work for becomes designated by PRA.


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    Keywords: Europe, UK, Banking, Securities, Investment Firms, IFPR, Designation Process, Statutory Instrument, Regulatory Capital, FCA, PRA, HM Treasury

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