PS21/17: A new UK prudential regime for MiFID investment firms  

Consultation opened
06/08/2021
Consultation closed
17/09/2021
Policy statement
26/11/2021
26/11/2021

This is the third in a series of policy statements that set out our rules to introduce the UK Investment Firm Prudential Regime (IFPR). 

Read PS21/17 (PDF)

Why we are introducing the IFPR

Introducing the IFPR means that there will be a single prudential regime for all FCA investment firms. It should reduce barriers to entry and allow for better competition between investment firms.
In line with our objectives and Mission, the IFPR will refocus prudential requirements and expectations away from the risks the firm faces, to also consider and manage the potential harm the firm itself can pose to consumers and markets.

Who this applies to  

  • any MiFID investment firm authorised and regulated by the FCA that is currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR) including: 
  • 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 use the current exemption 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 
  • Collective Portfolio Management Investment firms (CPMIs) 
  • regulated and unregulated holding companies of groups that contain an investment firm authorised and regulated by the FCA and that is currently authorised under MiFID and/or a CPMI 

Background to the IFPR  

This is the third in a series of policy statements on the IFPR. 

We published CP20/24 in December 2020 and the accompanying PS21/6 in June 2021. We published CP21/7 in April 2021 and the accompanying PS21/9 in August 2021. We published CP21/26 in August 2021 and this third policy statement completes our rules for introducing IFPR.  

When the UK was a member of the EU, we were heavily involved in the policy discussion to create the Investment Firm Directive (IFD) and Investment Firm Regulation (IFR). We support the aims of the EU’s IFD and IFR. The IFPR will achieve the same overall outcomes.  

However, we are introducing our regime after the UK has exited the EU. We believe it is right that we consider any appropriate changes to account for the specifics of the UK market and our duties to have regard to certain factors, including those set out in the Financial Services Act 2021 (FS Act).  

Our baseline approach is for consistency with the EU regime, unless we have specific reasons for diverging to reflect the nature of the UK market or otherwise comply with our duties under Part C of FSMA (as inserted by the FS Act).

Next steps  

The IFPR represents a major change for investment firms. It is critical that firms adequately prepare for the regime. The IFPR will take effect on 1 January 2022.
 

 

Page updates

13/08/2021: Information added Links to documents added