The Financial Conduct Authority (FCA) has published a discussion paper proposing new prudential rules for UK investment firms, to replace the EU's latest rulebook post-Brexit.
Following the end of the transition period there will be no obligation for the FCA to implement the EU's Investment Firm Directive and Regulation (IFD/IFR), due to take effect on 26 June 2021, and so seeks to "deliver a regime that has been designed with investment firms in mind".
New regulation would see firms subject to liquidity requirements "across the board", levels of initial capital required for authorisation "updated", a "brand new methodology" for calculating capital requirements and new remuneration and disclosure requirements, among others changes.
According to the FCA, the "large majority of UK investment firms" would prefer a domestic regime as it provides the potential of "lower regulatory costs, better alignment of requirements to business models, strengthened supervisory dialogue, improved competition and better prudential outcomes".
The discussion paper details the "key features" of the upcoming IFD/IFR and sets out a list of 35 questions for which the regulator is lobbying the industry for answers.
Included in the list of "key features" are the increased levels of initial capital required for authorisation (€75k, €150k and €750k, depending on the investment activity), the obligation for all investment firms to calculate a fixed overhead requirement, along with others using the 'K-factor' and an adapted consolidation risk policy.
Those policies deemed "significant" also include redesigned concentration risk and liquidity rules for all firms, a biannual ESG disclosure, and remuneration guidance which would see 40% of an individual's variable remuneration deferred for three to five years.
The FCA has set a deadline of 25 September 2020 for investment firms to respond to the proposed rules.