EU investment firms prudential regime ('IFR/D')

Overview: 

The new EU Investment Firms Regulation (IFR) and Investment Firms Directive (IFD) is a new, bespoke EU prudential regime for MiFID investment firms. The IFD/IFR began to apply to firms from 26 June 2021.

The IFR/IFD introduces own funds, liquidity assets, remuneration, governance, and reporting requirements. Some firms which are below specified thresholds will be subject to a more limited set of requirements. AIMA has provided commentary throughout the framework's legislative process and to the various RTS/ITS that the EBA has sought feedback on.

On 19 October, the EBA has published its final RTS on investment policy disclosures under the IFR. This will apply to Class 2 investment firms (i.e., non-SNIs) with on- and off-balance sheet assets on average greater than EUR 100 million. These firms will have to disclose this information in relation to those companies whose shares are admitted to trading on a regulated market and in which the proportion of voting rights exceeds 5% of all voting rights issued by the company. The first disclosure date will be 31 December 2021.

On 22 November, the EBA and ESMA published have published two separate reports under the IFD, containing (i) Guidelines on sound remuneration policies and (ii) Guidelines on internal governance. Both Guidelines apply to Class 2 firms, taking into account the proportionality principle. Both Guidelines will apply as of 30 April 2022.

The EBA and ESMA are inviting views on their draft Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and on their draft Regulatory Technical Standards on Pillar 2 add-ons for investment firms. Both are based on the IFD and are addressed to NCAs supervising Class 2 and Class 3 firms (non-SNIs and SNIs, resp.). The deadline for submitting comments to both consultations is 18 February 2022 and both documents would apply from 1 January 2023.

The EBA is consulting on draft Regulatory Technical Standards (RTS) on the specific liquidity risk elements to be considered as part of SREP and a proportional approach for SNIs, as well as draft guidelines for exempting SNIs from the liquidity requirements in IFR.  The deadline for submitting comments on these consultations is 10 March 2022.

The EBA is also seeking views on their draft Guidelines on data collection exercises regarding high earners and its draft Guidelines on remuneration and gender pay gap benchmarking exercise for investment firms. The deadline for comments for both draft Guidelines is 21 March 2022.

Upcoming actions: 

18 February 2022, IFD SREP Guidelines/RTS Pillar 2 add-ons comment deadline.

10 March 2022, comment deadline for EBA consultations on liquidity requirements.

21 March, comment deadline for EBA consultations on draft remuneration Guidelines.

30 April 2022, IFD Guidelines on sound remuneration policies and internal governance effective date.

If firms are finding compliance with the new requirements complex, AIMA may be able to help by arranging a peer-to-peer discussion group session so people can seek practical solutions from their peers.  If this is of interest, please contact Remmert Keijzer.

(Last updated: 21 January 2022)


Other related workstreams

MiFID

From ESMA proposals to modify the scope of the transaction reporting requirement to FCA proposals to remove RTS 27 and RTS 28 best execution reports, reviews of the MiFID II/MiFIR regulatory framework at EU and UK level are currently underway. See here for an overview of developments and AIMA’s regulatory and policy engagement.

EU Remuneration

IFR/IFD remuneration requirements effective as of 26 June 2021. EBA have publish its updated IFD remuneration guidelines. Notable other EU remuneration requirements under AIFMD and the UCITS Directive are also linked.


Other resources

IFR/D Official Texts

All of the directives, regulations, amending texts, ESA texts, etc. that apply to the prudential regime for EU investment firms all in one spot.