PIMFA warns firms to prepare for the scale and impact of post-Brexit regulations

1 April 2021

PIMFA warns firms to prepare for the scale and impact of post-Brexit regulations

PIMFA, the trade association for the wealth management, investment services and the investment and financial advice industry, is warning firms regarding the scale and impact of post-Brexit regulations being introduced to ensure they remain financially and operationally resilient.

The Financial Conduct Authority (FCA), Prudential Regulatory Authority (PRA) and HM Treasury are bringing forward new regulations in both areas that are likely to have a significant impact on UK wealth management and large financial advice firms.

In terms of financial resilience, the Investment Firm Prudential Regime (IFPR) has been designed specifically for MiFID investment firms to ensure they have sufficient  strength and flexibility to withstand volatility within the economic cycle.

The IFPR is likely to be comparable in size and complexity to MIFID II in terms of its impact and will require fundamental changes to how firms approach risk, liquidity and capital.

In the UK firms will not have to implement the IFPR until January 2022, unless they have a European base or subsidiary. If they do have a European subsidiary, they and other European firms will have to implement the IFPR by June 2021. This difference in implementation deadlines has the potential to add additional complexity to what it likely to already be a complex process.

Among the things firms will need to consider are likely increases in regulatory capital requirements beyond what they already hold today, restrictions on how certain staff are paid and restrictions on debt-funded acquisitions. There are three consultations on this, the second of which concerning remuneration, is due later this month.

At the same time, the FCA’s statement on Building Operational Resilience and final rules released on Tuesday (30 March), have been designed to ensure that enhanced Senior Managers and Certification Regime (SM&CR) firms and dual-regulated designated investment firms maintain operational resilience in the face of unexpected disruption. The final rules were first consulted on in 2019 and firms will now have 12 months’ implementation period before the rules enter into force on 31 March 2022.

In the next 12 months, firms will need to carry out mapping and scenario testing to a level of sophistication necessary to identify their important business services, set impact tolerances and identify any vulnerabilities in their operational resilience.

From 31 March 2022 firms will have a three-year transitional period to see how they operate within the impact tolerances they have identified and must make reasonable efforts to remain in their impact tolerances.

Giulia Lupato, Head of Regulatory Policy and Compliance at PIMFA commented: “The IFPR will have a significant impact on MiFID investment firms and involves fundamental changes to the way in which they work. It is vital that firms begin to analyse how these changes will affect them and to begin to make preparations.

“Meanwhile, we are pleased to see the FCA has recognised that achieving operational resilience is a journey personal to each firm, as well as the challenges posed by third parties and supply chains. We hope this will result in a proportionate approach to supervision when it comes to firms’ mapping of complex supply chains.

“We also appreciate the FCA agreeing to soften the initial, proposed deadline of three years from the date the rules come into effect by introducing a 4-year ‘staged’ approach.”

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Notes for Editors:

About PIMFA – the Personal Investment Management & Financial Advice Association

• PIMFA is the trade association for firms that provide investment management, investment services and advice to everyone from individuals and families to charities, pension funds, trusts and companies.
• The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
• PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
• PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
• PIMFA has made numerous recommendations to the FCA regarding the Future of Advice, the Future of Supervision, Open Finance and the FSCS levy – read more.
• PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
• Further information can be found at www.pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

• Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376
• Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225