IFPR FCA Returns: The importance of data

Why is data so important, even for SNI Firms?

Let us explain…

All IFPR firms (whether SNI or not) will need to submit MIF003 quarterly. MIF003 covers 'Metrics monitoring' and as the guidance notes state: “...is intended to reflect the SNI thresholds in MIFIDPRU and allows monitoring against those thresholds.”. This means by (around) 28 April 2022 all IFPR firms will need to have submitted the granular data on AUM, Client Money (CMH), Client Assets (ASA), Client Orders Handled (COH - cash and derivatives) and Daily Trading Flow (DTF - cash and derivatives) as well as a firms on and off balance sheet total and annual gross revenue (MiFID services and activities).

The return asks for average calculations and/or data at a given point of time (i.e., 4A - AuM at T - AUM on the reporting date).

These can be complex calculations (or certainly need some data). So if you have not 'dived into the weeds' of MIFIDPRU there isn't an excuse anymore. The FCA have published the final rules from first and second policy statements (see legal instruments – FCA 2021/38 and FCA 2021/39 - https://lnkd.in/dx3ycj7a

Where certain activities/metrics are not relevant (not holding client money for example) the guidance notes helpfully state: “'Where the FCA investment firm does not undertake an activity and there is no historical activity that continues to be reflected in the calculation of the relevant K-factor metric, it should leave the field blank.”. Although there will be complications for some firms i.e., historical activity, so do refer to the guidance notes.

So why are we referencing the metrics now?

There are transitional rules that can help a SNI Firm and non-SNI Firm with the calculations (see TP 4 K-factor metric calculations: transitional) where a firm does not have the historical data necessary to calculate the relevant 'K-factor average metric'. There are checks and balances on these (for instance, if you need 9 months data then October 2022 you will be expected to have collected the data. That kind of thing... just more complicated). But these transitional rules may well be helpful.

BUT....Under MIFIDPRU TP 5, a MIFIDPRU investment firm is required to collect at least 1 month of K-factor metrics that are relevant to any investment services and/or activities it carries on before MIFIDPRU begins to apply in full. And links into the reasonable estimates approach in MIFIDPRU TP 4 (if used).

So 1st December 2021. Not quite midnight yet Cinderella, but those glass slippers are probably getting uncomfortable...