All MIFIDPRU Firms with a March 31st 2022 Financial Year End, will be required to submit their MIF007 ICARA Questionnaire for the first time according to the response they gave to the FCA when they responded to the IFPR questionnaire in November 2021 on the FCA’s RegData platform. Some firms may have stated 30th June 2022 for the submission date of their MIF007 questionnaire.
The FCA’s expectation is that the Internal Capital Adequacy Risk Assessment process (ICARA) will become MIFIDPRU Investment Firms’ principal risk management tool on an ongoing basis. Whilst the ICARA will still be subject to approval by the firm’s governing body, it will, however, also be subject to onward scrutiny by the FCA through the annual MIF007 ICARA Questionnaire regulatory reporting obligation. The rationale for the FCA behind the new MIF007 ICARA Questionnaire return is to ensure that firm’s internal assessment of the risks arising from its business model, translate into adequate capital and liquidity resources in alignment with the Overall Financial Adequacy Rule and Principle for Business 4.
The MIF007 ICARA Questionnaire aims to gather in-depth information on MIFIDPRU Firms’ ICARA document including when the ICARA was reviewed and approved by the firms’ governing bodies, the own funds necessary for orderly wind down and own funds wind down trigger points, and assessing and monitoring the adequacy of liquid assets held. Non-SNI firms will also be required to provide a breakdown of their additional Own Funds Requirements, to address risks from ongoing activities.
The FCA may ask to view a copy of your ICARA document, if they are not satisfied with the answers provided in the MIF007 ICARA Questionnaire.
The ICARA document will undoubtedly become the biggest change for most firms subject to IFPR. Especially those Firms which were previously prudentially regulated under the Exempt CAD regime, and therefore did not have any obligations to produce an Internal Capital Adequacy Assessment process (ICAAP) document.
The Laven Group have developed templated documents, focussing on each key area of the ICARA documentary requirements for both MIFIDPRU Investment Firms categorised either as SNIs or non-SNIs.
For those Firms previously prudentially regulated under the BIPRU regime, the format of their latest ICAAP documentation will provide approximately one third of the material transferable across to the ICARA document. Thus, ex-BIPRU firms will also have a significant amount of work to complete to bring their ICARA in line with the FCA’s expectations.
The FCA recommends for firms to draft their own individual ICARA processes. However, the Laven Group have developed a templated ICARA document to assist with this drafting, which we predict will save firms up to two to three calendar months of work. This will enable MIFIDPRU Investment Firms to dedicate more time to their regulated activities. The templated ICARA documentation is available as a stand-alone document or included as part of a consulting package where the Laven Group will provide assistance to review the final draft of the ICARA documentation prepared by Firms.
Depending on the date specified to the FCA by MIFIDPRU Investment Firms with a March 31st 2022 Financial Year End are ready to submit their MIF007 ICARA Questionnaire on time, where the delivery date is 30th June 2022, Firms either need to contact us before Easter if they wish to have assistance from the Laven Group in producing their ICARA document or alternatively, postpone their MIF007 questionnaire submission date to August/September 2022.
