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Investment Firm Regulation and Investment Firm Directive

What do investment firms need to know?

The Investment Firm Regulation (IFR) and Investment Firm Directive (IFD) establish a new prudential regime for investment firms. They are both due to apply from 26 June 2021 across Europe and for the most part in the UK. Many of the existing prudential rules for investment firms, e.g. those contained in CRD IV,  were developed largely with deposit-taking institutions in mind. 

Under the new regime, investment firms fall into one of three categories:

  • Class 1: Systemic investment firms
  • Class 2: Investment firms which exceed certain size and risk thresholds, but are not systemically important
  • Class 3: The smallest and non-interconnected firms, that are subject to reduced requirements

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 approach to the Internal Capital Adequacy Assessment Process (ICAAP);
  • new requirements on remuneration policies and practices; and
  • extensive reporting and disclosure requirements. 

Our Financial Services Regulatory team have produced a helpful guide, which can be accessed here, 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. If you would like to receive more information please get in touch with your usual A&O contact. 

Read about the regime

News & insights

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Rolling bad apples - mandatory reference checks spread to Singapore

The Monetary Authority of Singapore (MAS) has proposed mandatory reference checks be carried out by all financial institutions and regulated entities.

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Hong Kong's Securities and Futures Commission (SFC) Enforcement Actions Tracker

Publications: 15 JUNE 2021

Hong Kong’s Securities and Futures Commission (SFC) Enforcement Actions Trends and Tracker

The SFC's latest annual and quarterly reports highlight the SFC's regulatory work since April 2019 and illustrate some key trends in its enforcement agenda.

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Publications: 11 JUNE 2021

The Financial Services Act 2021

The first step in shaping the UK's financial services regime post-Brexit.

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Key regulatory topics

Publications: 10 JUNE 2021

Key Regulatory Topics: Weekly Update 4 – 10 June 2021

There have been numerous publications relating to prudential regulation this week, including the BCBS’ consultation on its preliminary proposals for the prudential treatment of banks' cryptoasset…

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Download full IFD/IFR 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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