Regulatory AlertsPS21/9: Implementation of Investment Firms Prudential Regime
The Financial Conduct Authority issues Policy Statement 21/9 to implement the UK Investment Firms Prudential Regime, which is expected to take effect in January 2022. This new single prudential regime applies to various MiFID investment firms and their holding companies, replacing previous capital requirements to simplify regulation and enhance competition. The document finalizes rules for these entities while noting that further consultation and policy statements will follow in the fourth quarter of 2021.
We consulted on the second set of proposals to introduce the UK Investment Firms Prudential Regime (IFPR). This is the second of the Policy Statements we will issue to introduce the IFPR. We expect the IFPR to take effect in January 2022 subject to the Treasury making the necessary secondary legislation under the FS Act.
Read PS21/9 (PDF)
What we are changing
Introducing the IFPR means that there will be a single prudential regime for all FCA investment firms, simplifying the current approach for globally active systemically important banks.
It should reduce barriers to entry and allow for better competition between investment firms.
Some firms will have meaningful capital and liquidity requirements for the first time, adequate with the potential harm they can cause.
Who this applies to
The rules apply to any MIFID investment firm currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). These include:
investment firms that are currently subject to BIPRU and GENPRU
‘full scope’, ‘limited activity’ and ‘limited licence’ investment firms currently subject to IFPRU and CRR
‘local’ investment firms
matched principal dealers
specialist commodities derivatives investment firms that benefit from the current exemptions on capital requirements and large exposures including:
oil market participants (OMPs)
energy market participants (EMPs)
‘exempt-CAD’ firms
investment firms that would be exempt from MiFID under Article 3 but have ‘opted-in’ to MiFID
The rules also apply to any regulated and unregulated holding companies of groups that contain an investment firm that are currently authorised under MiFID and or a Collective Portfolio Management Investment (CPMI).
Background
IFPR is a new prudential regime for UK firms authorised under the Markets in Financial Instruments Directive (MiFID).
This is the second of a series of PSs that will set out our rules to introduce the IFPR. This PS summarises the feedback we received to CP21/7 .
Most respondents supported our proposals. In general, we have implemented our proposals as consulted on, and have made some amendments to provide more clarity on some of the feedback received.
Next steps
Accompanying this PS are the near final rules for the topics included here. These rules will be made final once the FS Bill receives royal assent and the relevant statutory instruments are in place.
We do not expect to make any changes to these rules before they are made final, unless this is essential due to ongoing policy work, and feedback received, for the other CPs on the IFPR.
We intend to publish a further CP around the beginning of August and a further PS summarising the feedback received and bringing together all our final rules in Q4 2021.
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