Some investment firms that are subject to UK CRR, can continue to comply with BIPRU rules. Find out more about eligibility and varying your permissions.
When the CRD IV was initially implemented in the UK, there was a competent authority discretion available under Article 95(2) of the Capital Requirements Regulation (CRR). It allowed certain investment firms to stay on the Capital Requirements Directive (CRD III) rules.
Following the UK’s withdrawal from the EU, we will exercise a similar discretion under Article 95(2) of the UK CRR.
Therefore, some investment firms that are subject to UK CRR can continue to comply with BIPRU – our Prudential sourcebook for Banks, Building Societies and Investment Firms - rules, rather than IFPRU – our Prudential sourcebook for Investment Firms – and UK CRR rules.
We identified the relevant firms based on the scope of their Part 4A permissions.
Firms that qualify to remain on CRD III/BIPRU rules
To qualify to remain under BIPRU rules, a firm’s Part 4A permissions must not allow the firm to carry out any of the following MiFID investment services and activities:
- (3) dealing on own account
- (6) underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
- (7) placing of financial instruments without a firm commitment basis
- (8) operation of Multilateral Trading Facilities
- (9) operation of Organised Trading Facilities
Also, a firm can't:
- carry out MiFID ancillary service (1) safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management, or
- be permitted to hold money or securities belonging to their client
A firm may also be eligible to remain on BIPRU rules if it believes that its Part 4A permissions are sufficiently limited to restrict it from carrying out the above investment services and activities.
What you need to do
You should check any requirements on your Part 4A permissions and any limitations against individual permissions.
You must also assess whether you need to be able to carry out MiFID investment service and activity (7) ‘placing of financial instruments without a firm commitment basis’. If you don’t do this, and you meet the other criteria, you will need to restrict your Part 4A permissions accordingly to become a BIPRU firm.
You can do this via Connect.
Varying your permission
If you want to vary your permissions for reasons other than to restrict your ability to do MiFID investment service and activity (7) to remain on BIRPU rules, you should follow the usual variation of the permissions process.
You should make it clear that you are doing this to remain on BIPRU rules. You also need to obtain a requirement on your Part 4A permissions not to carry out placing of financial instruments without a firm commitment basis, which will be discussed as part of the variation of permission application.
While this issue could be relevant to any firm, depending on the scope of its Part 4A permissions, it may be particularly relevant to firms with matched principal broker or box management limitations against a 'dealing in investments as principal permission'. Such firms would also need to meet the other criteria to remain on BIPRU rules.
IFPRU firms - permissions in scope
Arranging safeguarding and administration of assets permission
We do not consider that the permission under the Regulated Activities Order (RAO) of 'arranging safeguarding and administration of assets' is within the scope of MiFID ancillary service (1) ‘safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management’.
However, the 'safeguarding and administration of assets (without arranging)' permission, would fall within the scope of that ancillary service.
Matched principal brokers
We do not intend to treat matched principal brokers differently to other firms.
If these firms have sufficient limitations on their 'dealing in investments and principal' permission, and meet the other criteria to be a BIPRU firm, then we would treat them as BIPRU firms.
IFPRU 1.1.12 provides guidance on our interpretation of MiFID investment service and activity (3) 'dealing on own account'.
However, to be subject to BIPRU, such firms would also need to confirm that they are not carrying out MiFID investment service and activity (7) ‘placing of financial instruments without a firm commitment basis’.
Then they would need to add a requirement to their Part 4A permissions not to carry out this activity going forward. Firms should contact us to add this requirement to their Part 4A permissions, as explained above.