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FCA consultation DP20-2 – new UK prudential regime for MiFID investment firms

FCA consultation DP 20/2: A new UK prudential regime for MiFID investment firms

Background

  • DP 20/2: A new UK prudential regime for MiFID investment firms; published by the FCA on 25 June 2020
  • This Discussion Paper (DP) is relevant to all solo-regulated investment firms that are currently authorised under MiFID. It will also be of interest to Collective Portfolio Management Investment Firms and those investment firms authorised by the Prudential Regulation Authority.
  • In this Discussion Paper, the FCA sets out its initial views as well as technical details on the Investment Firm Directive (IFD) and the Investment Firm Regulation (IFR). The UK Government will be introducing a framework for the new prudential regime for UK firms. The FCA are seeking views on how best to implement this.
  • This discussion paper marks the first step in introducing a set of prudential rules for investment firms to better reflect their business models and the risk of harm they pose to consumers and markets.

Impacts

The FCA will use this DP to inform its consultation to introduce a UK prudential regime for investment firms. It provides stakeholders with the details of the EU Investment Firm Directive and Regulation (IFD/IFR), and requests industry feedback on the design of a UK regime.

3,000 investment firms operate in the UK, representing by far the largest market in Europe. With the exception of 8 large investment firms, regulated by the Prudential Regulation Authority, the FCA is responsible for prudential supervision of these firms.

Last year the EU published rules introducing such a regime, the Investment Firm Directive and Regulation (IFD/IFR), to be implemented by 26 June 2021. The UK is no longer a member of the EU and so, with a transition period ending at the end of this year, will not be obliged to implement the EU’s rules. The precise long-term economic relationship between the UK and the EU will be determined by ongoing negotiations.

The FCA proposes to introduce a UK regime that will achieve similar intended outcomes as the IFD/IFR whilst taking into consideration the specifics of the UK market. This discussion paper in intended to help that analysis.

Timeline with relevant dates to be logged on regulatory calendar

  • Consultation opens on 25 June 2020
  • Consultation closes on 25 September 2020
  • EU new prudential rules go live in April 2021; the UK needs to confirm its dates

Next steps

Any respondents need to send comments to the FCA.  The FCA will consider all comments and will publish a Consultation Paper (CP) later in 2020.

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