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IFPRU 1.2 Significant IFPRU firm

Purpose

IFPRU 1.2.1 G

Throughout CRD and the EU CRR there are various policies which have restricted application based on a firm's scope, nature, scale, internal organisation and complexity. These policies are provided in the following:

  1. (1)

    article 76 of CRD on the establishment of an independent risk committee;

  2. (2)

    article 88 of CRD on the establishment of an independent nominations committee;

  3. (3)

    article 91 of CRD on the limitations on the number of directorships an individual may hold;

  4. (4)

    article 95 of CRD on the establishment of an independent remuneration committee;

  5. (5)

    article 100 of CRD on supervisory stress testing to facilitate the SREP under article 97 of CRD;

  6. (6)

    articles 129 and 130 of CRD on applicability of the capital conservation buffer and the countercyclical capital buffer (provided that an exemption from the application of these articles does not threaten the stability of the financial system of the EEA State);

  7. (7)

    article 6(4) of the EU CRR on the scope of liquidity reporting on an individual 1basis;

    1
  8. (8)

    article 11(3) of the EU CRR on the scope of liquidity reporting on a consolidated basis; and

  9. (9)

    article 450 of the EU CRR on disclosure on remuneration.

IFPRU 1.2.2 G

The articles in IFPRU 1.2.1 G do not always carry the same wording in describing what may be significant in terms of a firm's scope, nature, scale, internal organisation and complexity, but the articles have a general policy to restrict the application of those requirements to institutions which pose higher risks by virtue of broadly their size, types of business and complexity of activities. The FCA's policy is to apply an objective definition with pre-defined thresholds to determine which firms are considered as significant for the purpose of these articles. In order to clarify which firms these policies apply to, IFPRU 1.2.3 R defines the factors which determine if a firm is a significant IFPRU firm.

Definition of significant IFPRU firm

IFPRU 1.2.3 R

A firm is a significant IFPRU firm if it meets, at any time, one or more of the following conditions:

  1. (1)

    its total assets exceeds £530 million;

  2. (2)

    its total liabilities exceeds £380 million;

  3. (3)

    the annual fees and commission income it receives in relation to the regulated activities carried on by the firm exceeds £160 million in the 12-month period immediately preceding the date the firm carries out the assessment under this rule on a rolling basis;

  4. (4)

    the client money that it receives or holds exceeds £425 million; and

  5. (5)

    the assets belonging to its clients that it holds in the course of, or connected with, its regulated activities exceeds £7.8 billion.

IFPRU 1.2.4 R
  1. (1)

    This rule defines some of the terms used in IFPRU 1.2.3 R.

  2. (2)

    "Total assets" means the firm's total assets

    1. (a)

      set out in the most recent relevant report submitted to the FCA under SUP 16.12 (Integrated regulatory reporting); or

    2. (b)

      (where the firm carries out the assessment under this rule at any time after the date of its most recent report in (a)) as the firm would report to the FCA in accordance with the relevant report, as if the reporting period for that report ends on the date the assessment is carried out.

  3. (3)

    "Total liabilities" means the firm's total liabilities:

    1. (a)

      set out in the most recent relevant report submitted to the FCA under SUP 16.12 (Integrated regulatory reporting); or

    2. (b)

      (where the firm carries out the assessment under this rule at any time after the date of its most recent report in (a)) as the firm would report to the FCA in accordance with the relevant report, as if the reporting period for that report ends on the date the assessment is carried out.

  4. (4)

    The client money means the money that a firm receives or holds in the course of, or in connection with, all of the regulated activities defined in paragraphs (1) to (4) of the Glossary that it carries on:

    1. (a)

      as set out in the most recent client money and client asset report submitted to the FCA under SUP, as applies to the firm in SUP 16.12 (Integrated regulatory reporting); or

    2. (b)

      (where the firm carries out the assessment under this rule at any time after the date of its most recent report in (a)) as the firm would report to the FCA in accordance with the relevant report, as if the reporting period for that report ends on the date the assessment is carried out.

  5. (5)

    "Assets belonging to its clients" means the assets to which the custody rules apply:

    1. (a)

      as set out in the most recent client money and client asset report submitted to the FCA under SUP, as applies to the firm in SUP 16.12 (Integrated regulatory reporting); or

    2. (b)

      (if the firm carries out the assessment under this rule at any time after the date of its most recent report in (a)) as the firm would report to the FCA in accordance with the relevant report, as if the reporting period for that report ends on the date the assessment is carried out.

IFPRU 1.2.5 R

A firm must regularly assess whether it, at any time, becomes a significant IFPRU firm.

IFPRU 1.2.6 R
  1. (1)

    If a firm, at any time, becomes aware that it is likely to become a significant IFPRU firm, it must forthwith make arrangements to establish and have in place sound, effective and comprehensive strategies, processes and systems to achieve compliance with the requirements that apply to a significant IFPRU firm.

  2. (2)

    The firm in (1) must comply with the requirements that apply to a significant IFPRU firm on the expiry of a period of three months from the date it meets any one of the conditions in IFPRU 1.2.3 R.

IFPRU 1.2.7 R

If a firm that is a significant IFPRU firm ceases to meet any of the conditions in IFPRU 1.2.3 R, it must continue to comply with the rules and requirements applicable to a significant IFPRU firm until the first anniversary of the date on which the firm ceased to be a significant IFPRU firm.

IFPRU 1.2.8 G

The FCA may, on a case-by-case basis, require a firm which does not meet any of the conditions in IFPRU 1.2.3 R to comply with the rules and requirements that apply to a significant IFPRU firm if the FCA considers it appropriate to do so to meet its strategic objective or to advance one or more of its operational objectives under the Act.

IFPRU 1.2.9 G
  1. (1)

    A firm may apply to the FCA under section 138A of the Act to waive any one or more of the conditions in IFPRU 1.2.3 R if it believes that one or more of the governance requirements in (2) that apply to a significant IFPRU firm may be disproportionate to it. In its application for such waiver, the FCA expects the firm to demonstrate, taking into account size, nature, scope and complexity of its activities in the context of it being a member of a group and the internal organisation of the group, that it should not be considered as significant.

  2. (2)

    The governance requirements referred to in (1) are:

    1. (a)

      1SYSC 4.3A.6 R1 on the limitations in the number of directorships; or

    2. (b)

      1SYSC 4.3A.8 R1 on the nomination committee; or

    3. (c)

      SYSC 7.1.18 R on the risk committee; or

    4. (d)

      SYSC 19A.3.12 R on the remuneration committee.

  3. (3)

    The effect of such waiver is that the firm would not be a significant IFPRU firm only for the purpose of the particular governance requirement in (2) that the waiver is expressed to apply to. For the avoidance of doubt, such firm would still be a significant IFPRU firm for the purpose of the other rules in the FCA Handbook that apply to a significant IFPRU firm.