The regulatory reporting mailer explained - Part 1

20 November 2021 | Michael Chambers

It is a FCA requirement for all UK investment firms to submit regulatory returns on an ongoing basis.

However, a new prudential regime has been defined by the FCA (Financial Conduct Authority) and is known in the UK as the IFPR (Investment Firm Prudential Regime) with a deadline (for the majority of the new regulation) of January 1st 2022. This means that investment firms will have a new reporting regime in place for Q1 2022.

In a two part blog series, Wheelhouse Advisors outlines the changes that FCA regulated investment firms can expect to see with their regulatory reporting. In part one, we will cover the following points

  • Single suite of reporting forms
  • Proportional and risk-based approach to IFPR reporting requirements
  • Quarterly reporting and changes in submitting of forms
  • Changes for SNI investment firms
  • Consolidated and group reporting

Under the new reporting regime, investment firms can expect to see the following requirements and changes:

Introduction of single suite of reporting forms for all FCA investment firms

It is intended that there will be a single suite of IFPR reporting forms for all FCA investment firms. At present, FCA firms fill out regulatory returns dependent on the prudential sourcebook they fall under. This can lead to complication if an FCA firm changes permissions leading to a new set of regulatory returns. Moreover, it is a challenge for the FCA to supervise firms comparably. The introduction of a single suite of reporting forms is intended to simplify the process for both FCA investment firms and the FCA.

A proportional and risk-based approach to IFPR reporting requirements

The FCA is proposing to implement a proportional and risk-based approach to IFPR reporting requirements. The expectation of FCA firms is that they will be able to supply additional details concerning their calculations they provide the FCA with in the event the FCA asks for it. For example:

  • reporting on concentration risk is not required for the smallest of FCA investment firms
  • reporting on concentration risk capital requirements is only required for trading book firms; and
  • group capital test reporting is for firms which are part of a consolidated situation but have applied for the group capital test waiver

Requirement for quarterly reporting and changes in form submission

The FCA will require that all regulated investment firms submit regulatory reporting on a quarterly basis. This means that the relevant reporting reference dates will be the last business day in March, June, September and December of each year, as the new regime begins on 1st January.  Deadlines will be 20 business days after each reporting date.

The FCA also proposes that investment firms should continue to submit balance-sheet and income statement returns. These will be required quarterly and will continue to use the existing formats of the FSA029 and FSA030 reports. FSA001, FSA002 and COREP returns will be retired for FCA investment firms. As under the current regime, investment firms that are structured as sole traders or as partnerships will also need to provide annual solvency statements.

Changes expected in reporting for SNI investment firms

The FCA proposes that SNI investment firms will generally report in accordance with the points listed above. However as noted above, SNI firms will not be required to submit the concentration risk report (MIF004 and MIF005). It has also been outlined that on an exceptional basis, subject to application and FCA approval, should a SNI firm be exempted by the FCA from complying with the liquidity requirements under the IFPR, then the firm will not be required to submit the liquidity report (i.e., MIF002).

Considerations for consolidated and group reporting

Should an FCA investment firm come under a UK investment firm group, then reporting will be required on a consolidated basis in addition to the standalone reporting – with the same capital adequacy and liquidity rules applying on the consolidated position. Should a GCT (Group Capital Test) be used, then the FCA needs evidence that investments within an investment firm are backed up by adequate capital of the appropriate quality at the parent or holding company level. The reports required by the FCA will be subject to whether the UK parent entity is regarded as a non-SNI firm or an SNI firm.

The new prudential regime is complex and will present many changes for investment firms. Wheelhouse Advisors assists investment firms so that they can meet the new requirements while still focussing on their own day to day business and deal flow. If you would like to learn more about our regulatory reporting support and how we can help you improve your systems while saving your firm time, contact: dking@wheelhouse-advisors.com

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