FCA Publishes the Final Rules for the Investment Firms Prudential Regime

The Financial Conduct Authority (FCA) has finalised the rules for the Investment Firms Prudential Regime (IFPR), set to commence on January 1, 2022. This new framework aims to streamline and simplify prudential requirements for UK firms authorised under the Markets in Financial Instruments Directive (MiFID).

Key Objectives of the IFPR:

• Simplification: The IFPR consolidates various prudential standards into a unified regime, reducing complexity for investment firms.
• Risk Management: The regime shifts focus from the risks firms face to the potential harm they could pose to consumers and markets, promoting a more proactive approach to risk management.
• Proportionality: By aligning prudential requirements with the size and activities of firms, the IFPR ensures that regulatory expectations are proportionate to each firm’s potential impact.

Who Will Be Affected?

The IFPR applies to:

• MiFID investment firms authorised and regulated by the FCA.
• Collective Portfolio Management Investment Firms (CPMIs).
• Regulated and unregulated holding companies of groups containing either of the above.

It’s important to note that PRA-designated investment firms will remain under the prudential supervision of the Prudential Regulation Authority (PRA).

Final Rules and Guidance:

The FCA has published the final rules in the legal instruments FCA 2021/38 and FCA 2021/39. These documents outline the detailed requirements and expectations for firms under the new regime.

Next Steps for Firms:

With the IFPR’s implementation date approaching, it’s crucial for affected firms to:

• Review the Final Rules: Examine the published legal instruments to understand the specific requirements.
• Assess Impact: Determine how the new regime affects your firm’s operations, capital requirements, and risk management practices.
• Prepare for Compliance: Develop and implement strategies to ensure adherence to the new standards by the January 1, 2022, deadline.

For comprehensive information and resources, visit the FCA’s dedicated IFPR page.

The introduction of the IFPR marks a significant shift in the regulatory landscape for UK investment firms, emphasising a more streamlined and risk-focused approach to prudential supervision.