FCA Implementation of Investment Firms Prudential Regime

On 29 June 2021, the FCA published Policy Statement PS21/6 which is the first of the Policy Statements issued to introduce the UK Investment Firms Prudential Regime (IFPR).

IFPR is a new prudential regime for UK firms authorised under the Markets in Financial Instruments Directive (MiFID).  This is the first of a series of policy statements that will set out the FCA’s rules to introduce the IFPR.

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.

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).