On 26 July the Financial Conduct Authority (FCA) published policy statement 21/9, which enacts the much anticipated implementation of the Investment Firms Prudential Regime (IFPR). This particular consultation paper follows CP21/7 which was published in April this year. It is in fact the second policy statement on the IFPR, the first being PS 21/6 which was published in June this year, which in turn was consulted upon in CP20/24 that was published in December 2020. A final policy statement (yet to be consulted on) is due to be published in the final quarter of this year.
This particular policy statement has finalised rules in respect of much of the IFPR, including:
- Own funds requirements (the remainder, i.e. which was not covered in PS21/6)
- Risk management, governance, ICARA and SREP
- Regulatory reporting (remainder)
- Remuneration requirements
- Clearing members and indirect clearing firms
- Interaction between MIFIDPRU and other prudential sourcebooks
- Permissions and application forms.
The FCA has also used PS21/9 to clarify a number of concerns that had begun to emerge since CP21/7 – in particular the extent to which the regime would apply to the newly created category of SNI firms (small non-interconnected). The FCA has taken a robust approach, confirming that own funds requirements, liquidity and ICARA all apply to firms in this category. The FCA has also provided more guidance on the ICARA process itself, including guidance as to ‘assessing harm’ as is required under the regime.
PS 21/9 has also made an important clarification in respect of firms acting as clearing members and indirect clearing firms. The FCA has stated that for the purposes of IFPR, these firms are to be treated as non-SNI firms as they are interconnected to other financial institutions. Therefore K-DTF would apply to them and they should include pre-funded contributions to a central counterparty (CCP) default fund as part of the trading counterparty default (K-TCD) requirement.
PS21/9 contains a wealth of detail and demands careful consideration, to view the policy statement please click here. If you would like more information on the IFPR, please subscribe to the Regulation Tomorrow Podcast on Apple Podcasts, iTunes, Spotify and Soundcloud, as we will be releasing a special series of IFPR podcasts (the RT Plus IFPR Series) covering different aspects of the regime. We will also be discussing this in the August edition of the Regulation Tomorrow Podcast.