FCA seeks industry views on a new prudential regime for UK investment firms

FCA seeks industry views on a new prudential regime for UK investment firms

The Financial Conduct Authority (FCA) is seeking views on establishing a new prudential regime for UK investment firms.

This marks the first step in introducing a set of prudential rules for investment firms to better reflect their business models and the risk of harm they pose to consumers and markets.

Currently, most investment firms follow very similar prudential rules as deposit-taking credit institutions agreed through the Basel framework.

Last year the EU published its requirements for a regime specifically designed for investment firms, the Investment Firm Directive and Regulation, due to be implemented in the EU by the end of June 2021. Whilst the UK was a member of the EU, the relevant UK authorities were involved in the development of the EU’s regime.

As the regime will be introduced after the scheduled end of the UK’s transition period to exit the EU, the UK will introduce its own prudential regime for investment firms, as announced in the Chancellor’s statement in the Budget in March.

On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).

The information in the Discussion Paper will be of interest to all solo-regulated investment firms that are currently authorised under MiFID. It will also be of interest to collective portfolio management investment firms and those investment firms authorised by the Prudential Regulation Authority.

Christopher Woolard, interim chief executive of the FCA, said: “We have long advocated for a bespoke prudential regime for investment firms. A new UK regime would represent a significant improvement in the prudential regulation of investment firms. For the first time, it would deliver a regime that has been designed with investment firms in mind.”

The discussion paper can be found here.

Investment firms and other interested stakeholders will have until September 25 to respond.


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