FCA Regulatory Update: Key Reminders for MIFIDPRU Firms

Critical clarifications from the FCA on IFPR compliance 

1. Investment Firm Group (IFG) notifications

Despite the requirement to seek approval for change of control(“C-I-C”), the FCA have made it clear in their latest update that under MIFIDPRU 2.4.20R, firms must also notify the FCA as soon as they become aware of:

• The creation of an Investment Firm Group (IFG); or
• Changes to an existing group (e.g. post-acquisition).

Firms must Submit the form via Connect, using the MIFIDPRU 2 Annex 8R form. This will need to be done post approval by the FCA of the C-I-C once the change is executed.

Important note:
If the list of FRNs in your consolidated MIF return (Q2) differs from the FCA’s pre-populated FRNs, the firms must submit a new IFG notification.

2. Partnership profits & Common Equity Tier 1 (CET1) capital

For LLPs, not all profits qualify as CET1 capital:

• Allocated profits are not CET1 if members have unconditional rights to withdraw – these are liabilities.
• Unallocated profits may be CET1 if:
  • The LLP has an unconditional right to retain the profits;
  • They are available to absorb losses immediately and unrestrictedly per Article 26(1) UK CRR.

Firms should review their LLP agreements in detail to understand the capital impact.

3. Small companies exemption – misuse by MiFID firms

MiFID investment firms (as defined under the Companies Act) are not eligible for the small companies exemption, regardless of size thresholds – and have been warned by the FCA to ensure that accounts filed with Companies House reflect the correct status in line with its regulatory classification.

4. K-factor calculations – focus on K-AUM

Clarified methodology for calculating K-AUM, per MIFIDPRU 4.7:

• Perform the calculation on the first business day of each month.
• Use AUM values from the last day of the previous 15 months.
• Exclude the 3 most recent months.
• Calculate the average of the remaining 12.

Applies similarly to: K-CMH, K-ASA, K-COH, and K-DTF factors.

5. ICARA timelines & MIF007 reporting errors

a.) ICARA timelines

• The governing body must approve the ICARA within a reasonable timeframe after its completion.
• Delays can render the assessment outdated or inaccurate.

b.) Common reporting errors

Own Funds Threshold Requirement (OFTR) – Cell 10A – Report the highest of:

• PMR (from MIF001, 8A)
• Ongoing operations need (MIF007, 11)
• Orderly wind-down need (MIF007, 12)

Liquid Assets Threshold Requirement (LATR) – Cell 33A -Sum of:

• Basic Liquid Asset Requirement (MIF002, 3A + 4A)
• Higher of:
  • Liquid assets for ongoing operations (MIF007, 34A–37A)
  • Wind-down additional needs (MIF007, 38A)

The FCA continues to monitor for persistent reporting errors and may engage directly with non-compliant firms.

Next steps for firms

1. Review group structure and update the FCA via MIFIDPRU 2 Annex 8R if applicable.
2. Assess LLP agreements to ensure only qualifying profits are treated as CET1.
3. Check Companies House submissions for accuracy in use of the Small Companies Exemption.
4. Validate the firm’s current K-factor inputs and methodology.
5. Consider strengthening the firm’s ICARA approval timelines and review MIF007 reporting.

The full document can be viewed here.

Please contact us at the Asset Management practice if you need support in any of these matters.