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2 March 2023

More than a year has now passed since the new prudential regime for MIFIDPRU investment firms was launched. How time flies when you’re having fun!

The new regulations are intended to simplify and streamline the prudential requirements for MIFID investment firms and focus on the potential harm they can pose to consumers and markets. So, in the 12 months we’ve had to get used to them, what have we compliance consultants learned about IFPR and its impact on you, our clients?

It’s not ‘one size fits all’ legislation

Every firm is different, in both size and complexity, as we have found out when trying to map their structures within the respective MIFID activities.

Some firms have been taking advantage of the transactional relief. If this applies to you, look at increasing your PMRs (permanent minimum capital requirement) in year two by a £5,000 increment and recalculate your Fixed Overhead Requirements (FORs), so you can move gradually closer to the full requirements.

There have been a couple of examples of the importance of managing key dependencies, when firms rely on financial support from an overseas parent. This has led to crucial discussions with the parent company about timely payments, as it is essential to ensure firms can meet the requirements at all times. We have also had to undertake a review of the client’s systems and controls.

There’s no denying that applying the rules has proved testing for each firm type, especially if the client is part of an investment firm group.

Minimal updates

The FCA has made very few changes to the original IFPR rules. This is perhaps because a thematic review of the ICARAs (internal capital and risk assessment) seen so far is planned and further output from this is awaited eagerly.

Assisting firms with their MIF returns and ICARAs has been a learning process for all of us. It has been a challenge to make management bodies reflect on their financial viability and determining threshold requirements remains a hurdle. We have also had to change their mindset about the potential harm they present to consumers, the markets and themselves in that order. This is extremely topical at the moment, as it feeds into the Consumer Duty requirements, which you are more than likely working hard to implement, if you are within the scope of the new regulations.

What’s next?

As we enter the next phase of IFPR, you will be expected to produce a second round of ICARAs and the subsequent submission of the MIF007 (ICARA questionnaire). Hopefully you will be able to carry it out more confidently this time.

The more familiar MIF008 (renumeration) is also due this year and the FCA has provided a couple of templates you may find useful – the RPS template and Table of material risk takers (MRTs).

In terms of disclosure, please remember that for the first full performance period you entered after January 2022, you will be required to make your first disclosures under the new MIFIDPRU requirements.

If you would like more information about IFPR and how it impacts on your firm, you can sign up to the FCA’s newsletter for updates and regulatory deadlines by emailing IFPR-newsletter@fca.org.uk with ‘sign up’ as the subject. Alternatively, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk

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