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Sub practice

Investment Firm Prudential Regime

What do investment firms need to know?

The UK is set to implement a new prudential regime for MiFID investment firms (the investment firm prudential regime or “IFPR”). This is modelled on the EU’s Investment Firm Regulation (IFR) and Investment Firm Directive (IFD) which although finalised and in force, did not apply before the UK left the European single market on 31 December 2020. As such, the IFR and IFD were not onshored into UK law. However, when the UK was a member of the EU it had been an advocate for introducing such a regime and heavily involved in the policy discussions and so it must come as little surprise that the UK’s proposed IFPR bears a close resemblance to the EU’s IFR and IFD.

Whilst the EU’s regime applies from 26 June 2021, it is anticipated that the IFPR will apply in the UK from 1 January 2022.

The impact on firms is wide-ranging and includes:

  • new capital requirements, to be calculated using the “K-factor” methodology designed to reflect the risks presented by firms;
  • new rules on prudential consolidation, liquidity and concentration risk;
  • a new Internal Capital and Liquidity Assessment process (ICARA);
  • new requirements on remuneration policies and practices; and
  • extensive reporting and disclosure requirements. 

Our Financial Services Regulatory team produced a helpful guide on the IFR and IFD and a series of briefing papers on the main pillars of the regime and their expected impact, which can be accessed via the links below. The team also ran a series of webinars on the UK’s IFPR proposals which can be accessed below. If you would like to receive more information please get in touch with your usual A&O contact. 

Catch up on our webinar series

What do investment firms need to know about the Investment Firm Regulation and Investment Firm Directive?

Do you have the K-factor?

In our first session of the series, we focused on the own funds and liquidity requirements, including firm classification, the new K-factors and consolidation issues. This overview will be of interest to legal, compliance and operational teams dealing with regulatory capital and reporting, as well as business functions responsible for execution of transactions and product design. Other business functions within investment firms and groups may also find it useful.

Related people: Bob Penn, Kirsty Taylor and Andrzej Wieckowski

View webinar
What do investment firms need to know about the Investment Firm Regulation and Investment Firm Directive?

ICARA so good?

In this session we considered the ‘new’ governance, risk management and Internal Capital Adequacy and Risk Assessment (ICARA) process requirements for MiFID investment firms under the new prudential regime. To what extent are the requirements really new? What does the shift in focus and the assessment of risk for investment firms mean for senior management, systems and controls and risk committees?

Related people: Bob Penn & Kirsty Taylor

View webinar
What do investment firms need to know about the Investment Firm Regulation and Investment Firm Directive?

Show me the (IFPR) money

In this seminar recording, which should be of interest to FCA regulated investment firms and members of their groups, we provided a review of the remuneration requirements applicable under the IFPR.

Kate Sumpter, Jack Prettejohn, Vicky Wickremeratne, Gordon Bartlett

View webinar

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Download full IFR/IFD guide

What do investment firms need to know about the Investment Firm Regulation and Investment Firm Directive?

Read our guide on the main pillars of the regime and their expected impact.

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