With the first set of Investment Firms Prudential Regime (IFPR) returns submitted in May of this year, the FCA has highlighted its discontent with what it received in its latest IFPR newsletter, stating the quality of some returns did not meet “expectations”.
The latest newsletter also touched upon the following areas:
MIFIDPRU regulatory reporting;
Upcoming transitional own funds notification deadline; and
MIF007 (ICARA questionnaire) reporting date;
This article will summarise the key takeaways from the newsletter, with some advice around how firms should respond to the FCA’s feedback.
FCA finds Q1 MIFIDPRU reporting data quality variable
The first set of MIFIDPRU regulatory returns were due on 3 May 2022 and the FCA has already begun to review them, observing that the quality of some of the submissions does not meet its expectations, containing inaccurate and/or incomplete data.
The FCA did not state what its exact expectations were in the newsletter and instead referred readers to previous correspondence made to the industry around regulatory returns. Namely, the joint PRA and FCA Dear CEO letter published in February 2021 and its communication on the quality of prudential regulatory returns from February 2018. The key implication of its correspondence follows the reoccurring theme of placing the responsibility in the hands of senior management, where they should be identifying any failings while remaining compliant, in the spirit of ‘self-regulation’.
Given that this was the first set of returns under IFPR, it may be the case that the FCA has not entirely fleshed out what its new expectations are and will continue to monitor the forthcoming returns in order to identify common mistakes. However, until this is the case, firms should identify any discrepancies in their regulatory submissions with the requirements of the new regime. Firms should ensure that senior management is proactively playing a role in monitoring regulatory reporting practices, making sure they are fit for purpose and comply with the relevant reporting provisions.
Although the FCA has not made any mention of potential action it will be taking as a result of inaccurate returns, firms should be wary of getting these returns right. Firms may also want to consider retrospectively reviewing the Q1 submissions they made as well as their calculation methodologies, to ensure that the data provided to the FCA is complete and accurate.
Reminder of extension of notification date for transitional grandfathering of non-CRR capital instruments
The FCA took the opportunity to remind firms of the changes enacted by Handbook Notice 99 in relation to the extension of the notification deadline for utilising capital instruments that were not covered by the UK Capital Requirements Regulation (CRR).
FCA investment firms and UK parent entities that were not subject to the UK CRR immediately before 1 January 2022, were required to notify the FCA (under MIFIDPRU TP 7) if they wanted to treat existing capital instruments as own funds under MIFIDPRU 3. This is referred to as a MIFIDPRU TP 7.4R(2)(b) notification and had an original deadline of 1st January 2022. Due to receiving lower than anticipated notifications, the FCA published Handbook Notice 99 on 27th May 2022, which extended the deadline for MIFIDPRU TP 7.4R(2)(b) notifications until 29th June 2022.
Completing this notification prior to the new deadline gives MIFIDPRU Investment Firms and parent entities the opportunity to make capital instruments (issued before 1 January 2022) compliant with MIFIDPRU 3 and therefore avoid having to make a MIFIDPRU 3 application. In order to be effective, the capital instruments listed in the TP 7 notifications must meet the eligibility criteria in MIFIDPRU 3. It is worth noting that notifications that were submitted late (but prior to 29 June 2022) remain valid.
Furthermore, through Handbook Notice 99, the scope of MIFIDPRU TP 7 has been extended to include former IFPRU investment firms and former consolidating UK CRR parent undertakings, where those entities did not obtain approvals under the UK CRR before 1 January 2022.
ICARA/MIF007 reporting dates can be changed and should be notified through Connect
Firms that completed their IFPR setup questionnaire were able to set their MIF007 reporting date in line with their processes and procedures. Firms should now see the MIF007 scheduled in their RegData portal accordingly.
When drafting and completing the MIF007 return, it is important to note that the Firm must have its ICARA process documented, approved and signed off by its governing body.
In the newsletter, the FCA have clarified that firms are able to change the ICARA/MIF007 reporting date, relying on provisions under MIFIDPRU 7.8.4R. Where a firm wishes to revise the submission date of the MIF007, it must submit a notification to the FCA through the Connect portal.
Non-SNI firms have to submit new REP-CRIM Returns
Although not mentioned in the IFPR newsletter, it is important to note that non-SNI MIFIDPRU Investment Firms are now subject to completing and submitting REP-CRIM returns through the RegData portal. Firms will note that these have been scheduled automatically and the first of these returns are due on 30 June 2022.
Next steps and how we can help
In summary, following the publication of the FCA's latest IFPR newsletter, firms should consider taking the following action:
Review internal regulatory reporting practices
Submit a MIFIDPRU TP 7.4R(2)(b) notification in time for the 29 June deadline
Push their ICARA/MIF007 reporting date back if necessary
Ensure they are prepared for the upcoming REP-CRIM Returns
Cosegic Services has a dedicated Prudential Services team that can assist with the matters outlined above. We offer a wide range of services ranging from regulatory returns, to helping draft your ICARA process and much more.
If you need assistance with any of items detailed above, please email our Managing Director of Prudential Services, Harpartap Singh at [email protected] or call +44(0)20 7060 4499 and one of the team will get back to you as soon as possible.
If you are looking for further support related to IFPR, please visit our dedicated webpage for additional information.
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