How investment firms can prepare for the UK’s new prudential regime – Finance and Banking


UK: How investment firms can prepare for the UK’s new prudential regime

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Newgate ComplianceChief Executive Matthew Hazell outlines the steps investment firms need to take to prepare for Britain’s new prudential regime. This article is part of our IFPR preparation series.

The Financial Conduct Authority (FCA) is introducing a new simplified UK Investment Firm Prudential Regime (IFPR) for investment firms authorized under the Markets in Financial Instruments Directive (MiFID), which will come into effect effective January 1, 2022.

IMPACT OF IFPR

The new regime will have a significant impact on the prudential requirements that apply to many investment firms, including collective portfolio management investment firms, and will particularly affect firms that are part of a group structure of British companies.

HOW TO PREPARE

Businesses should assess their classification under the new regime and, where appropriate, comply with new requirements, including:

  • increase in the minimum capital required;

  • consolidated filing required for companies forming part of a UK group of companies;

  • new public disclosure requirements and quarterly filings due on FCA’s RegData system;

  • enhanced governance and compensation requirements;

  • the implementation of a new Internal Capital and Risk Adequacy Assessment (ICARA) process to replace the ICAAP; and

  • implementation of new policies, eg remuneration, disclosure and prudential policies.

DETERMINE YOUR CABINET CLASSIFICATION

The first step is to determine which prudential category your company belongs to. Firms will no longer be classified as CAD-exempt, BIPRU or IFPRU firms under the new regime. There are two types of investment firms under the RSPF:

  • “Small and Uninterconnected” (SNI); Where

  • non-SNI companies (Non-SNI).

SNI companies are those whose activities are below the following thresholds in the table below. Firms operating above these thresholds or trading on their own account and/or holding client money and/or safeguarding client assets will be considered non-NIS

UNDERSTANDING THE IMPACT ON YOUR PRACTICE

The new requirements will apply differently to SNIs and non-SNIs. A summary of the requirements is shown below:

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NEXT STEPS

Businesses should begin to familiarize themselves with the proposed changes to the IFPR and begin planning how to meet the new requirements.

HOW CAN NEWGATE HELP YOU?

Newgate has developed a readiness assessment to undertake a gap analysis of a company’s systems and controls against requirements identifying corrective actions to be taken.

We have developed an enhanced compliance framework on our proprietary “GATEway” compliance system which includes updated policies, assessment documents and the compliance monitoring plan to ensure these changes are taken into account and adhered to. continuous way.

Newgate’s IFPR Preparation Package includes:

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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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