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FCA Consultation Paper 20/24 – new UK prudential regime for MiFID investment firms

FCA Consultation Paper 20/24 – new UK prudential regime for MiFID investment firms

Background

  • On 14 December 2020, the Financial Conduct Authority (FCA) published its first of three Consultation Papers about the planned new UK prudential regime
  • Note: this CP 20/24 is 324 pages long and is very detailed
  • The FCA is seeking views on its proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR) for FCA prudentially-regulated investment firms (FCA investment firms)
  • The FCA plans to issue three consultations before introducing the new UK prudential regime in January 2022
  • The draft rules will apply to any MIFID investment firm that are currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR)
  • Final rules will be published over the course of next year
  • Where possible, the FCA is consulting earlier on the more complex topics in order to give investment firms as much time as possible to ready themselves
  • The new regime will streamline and simplify the prudential requirements for solo-regulated investment firms in the UK
  • At present, there are many different regimes which apply depending on size of firm and type of investment business

Impacts

The new rules will extend the framework for prudential requirements to consider the potential harm FCA investment firms pose to clients, consumers and the market.  This includes the amount of capital and liquid assets the FCA investment firm should hold so that if it does have to wind down, it can do so in an orderly manner.

There are approximately 3,200 FCA investment firms in the UK. Many people have products with investment firms, ranging from workplace or personal pensions and investment ISAs to those who use a platform to trade stocks themselves.

The new regime represents a major change for FCA investment firms. It is critical that firms adequately prepare for the regime.

The FCA is keen to receive feedback from stakeholders through this and later consultations.

Feedback will allow the FCA to develop final rules that achieve its, and Parliamentary, objectives for the regime, and that are also workable for FCA investment firms.

Timeline with relevant dates to be logged on regulatory calendar

  • The consultation period for this first consultation closes on Friday 5 February 2021

Next steps

Any respondents need to send their comments to the FCA.  Comments can be provided online or in writing as detailed in the Consultation Paper.

If anyone has specific questions or needs any advice, contact our specialists.