The regulatory reporting mailer explained - Part 2
This series sets out to help investment firms understand what to expect regarding regulatory reporting in relation to the IFPR (Investment Firm Prudential Regime) when it comes in to force on 1st January 2022.
In part two, we will be covering the proposed regulatory reporting for the following:
- the liquid asset requirement
- the ICARA process
- remuneration, and
- updating FIN067 additional reporting for CPMIs
Liquid asset requirement reporting (MIF002)
In the near-final rules for the new prudential regime for MiFID investment firms, the FCA defines the types of liquid assets that investment firms should hold and how they should calculate their basic liquid asset requirement. These can be found in the MIFIDPRU 6.
FCA investment firms starting to map their reporting onto the new template MIF002, be aware, CP21/7 included an updated draft template with more detail compared to the one included in CP20/24. This now reflects terminology that can be found in said CP20/24. It is a requirement for all FCA investment firms to complete this return on a quarterly basis.
ICARA process reporting – The ICARA Questionnaire (MIF007)
The FCA have implemented the ICARA Questionnaire which offers a snapshot from each firm of the of the results of the ICARA process. The requirement is to submit the report annually. This replaces the current FSA019 form. While the submission is annual, the FCA expect firms to manage the ICARA process on a continuing basis.
In addition to an overall snapshot, the ICARA Questionnaire will also provide the FCA with additional information regarding the results of a firm’s own review of its ICARA process, including any issues that have been identified. The form is also the way a firm would inform the FCA of any additional own funds and liquid assets that it has identified it should hold through its assessments.
In order to gain an overall view, the FCA will also require a firm to set out details of their business model. Services listed in MiFID do not necessarily cover all activities of the firm, like venture capital or corporate finance, so the annual return will also cover overall business models.
In the FCA’s recent s.165 questionnaire, firms were required to inform the FCA of their chosen submission date in 12 month period. This date can be amended going forward, providing that there are no more than 12 months between each submission.
It should be noted that in some circumstances, an investment firm may be required to review its ICARA process more frequently than the standard annual requirement. This can occur if activities carried out by the firm are significant in their complexity or scale and the firm feels it pertinent to carry out a more regular review. In this instance, the FCA suggests that a firm should submit MIF007 after each review carried out. In this instance, the investment firm would notify the FCA of the dates for each submission.
Finally, a firm may need to carry out a review of its ICARA process should there be a substantial change in its operating or business model. Should this situation arise, the FCA proposes that a firm must submit their MIF007 within a reasonable timeframe of its governing body approving the outcome of that review.
Reporting requirements for CPMIs
Currently, CPMIs complete either FIN067 or FIN068 as an additional return and it is dependent on whether they are subject to BIPRU or IFPRU. However, both of these regimes will be replaced by the IFPR. In order to simplify the process, CPMIs will be required to complete a revised FIN067. This return will continue to be a supplementary report in addition to the applicable “MIF00” reports in MIFIDPRU 9.
The FCA will align the submission dates of the FIN067 return with the submission dates for MIF001 and MIF002. This proposal means that CPMI firms are able to provide the supplementary data in FIN067, as well as the standard data on their capital in MIF001 and their liquid assets in MIF002.
It should be noted that from 1 January 2022, FOR should be calculated as set out in MIFIDPRU 4 for the whole business.
With regards to the information collected in FIN067, the FCA will no longer require granular information about the PII policies that CPMIs hold.
The new MIFIDPRU Remuneration Code will apply to all FCA investment firms in varying degrees depending on a firm’s categorisation. This will be supported by a new MIFIDPRU Remuneration Report (MIF008). The existing Remuneration Benchmarking Information Report (REP004) and High Earners Report (REP005) will be retired.
The FCA proposes tailoring the reporting requirements dependent on whether a firm is subject to basic, standard or extended remuneration requirements:
For SNI firms, the reporting required will be basic information concerning the number of staff they have and the total fixed and variable remuneration they are awarded in the relevant year. For Non‑SNI firms, the information will need to be split between material risk takers (MRTs) and non-MRTs. Non‑SNI firms will also need to detail information regarding any ex-post adjustments made to variable remuneration.
As we approach the start date for the new IFPR regime, there are a number of changes and anomalies for firms to consider. Wheelhouse Advisors can provide guidance and advice on what your firm needs to do to prepare. If you would like to discuss your requirements in more detail, please contact email@example.comBack to articles