The Financial Conduct Authority (FCA) yesterday published its second Policy Statement (PS21/9) relating to the Investment Firms Prudential Regime (IFPR). This Policy Statement covers the areas discussed in the second Consultation Paper (CP21/7) that we covered in our May 2021 webinar and which is available on demand.
PS21/9 is some welcome clarity including confirmation that firms trading in their own name but on an agency basis will be considered a Non-SNI firm and firms will no longer be required to report in XBRL format. There is also additional information relating to Own Funds Requirements, Liquidity Requirements, ICARA, Risk Management, Remuneration, Governance and Regulatory Reporting amongst other relevant areas. Some of the key things to note:
Regulatory reporting
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As stated above firms will will not be required to submit in XBRL format, they will report using Reg Data.
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Recognition of the new ICARA regime, with firms being asked to report on a ‘best endeavours’ basis for 2022 with the FCA providing aggregated feedback.
ICARA proportionate:
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The FCA expect firms to take a proportionate approach based on their business model. Basic own funds and liquid assets requirements may be sufficient to cover a less complex firm’s requirements, but the rationale would need to be fully documented in the ICARA.
Categorisation for firms trading in their own name on an agency basis:
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Firms which trade in their own name but on an agency basis, for example certain Portfolio Managers, will be subject to K-DTF and will be a non-SNI if they have a non-zero value.
Collective Portfolio Management Firms (CPMI’s) will be subject to MIFDPRU:
- Fixed Overhead Requirements detailed in MIFDPRU shall apply to the whole firm.
Fixed overheads requirement and allowable deductions:
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Guidance and clarification on the deductions allowable when calculating the ‘fixed overhead requirement’.
Assets under management (AUM) where management has been delegated:
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Confirmation firms must include those AUM delegated to another entity when calculating K-AUM.
- Assets under management for ongoing advice must meet the definition of investment advice under MiFID i.e. a personal recommendation. It must also either be of a recurring nature; or in the context of continuous or periodic assessment and monitoring; or on the basis of a contractual arrangement.
Client Money K-Factor:
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Client money held in a qualifying money market fund (QMMF) is considered under K-CMH rather than K-ASA.
Remuneration thresholds:
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Remuneration thresholds to be calculated on an individual entity basis.
Policy Statements PS21/6 and PS21/9 cover many of the core requirements of IFPR and have now been written into policy. Firms should make sure they understand the requirements and how they are affected.
You may find our IFPR Resources area useful with its articles and insights, as well as our two on demand webinars covering the Consultation Papers relating to the two Policy Statements:
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How IFPR affects ‘exempt-CAD’ and other types of firms.
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Important considerations.
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Practical implementation steps.
If you wish to discuss any aspect of PS21/6, PS21/9 and how the broader IFPR requirements may impact your firm then please get in touch.
