By Katrina Cockram, Senior Compliance Consultant, UK
The FCA’s Investment Firm Prudential Regime (IFPR) introduced three new prudential categories of firms: small and non-interconnected (SNI), non-SNI, and large non-SNI. Since IFPR came into force on 1 January 2022, we’re seeing more and more firms approach the threshold that separates SNI and non-SNI firms. In this article, we’ll outline the steps a firm should take when they know they’re going to cross the threshold and need to reclassify to ensure continued compliance.
IFPR thresholds: a summary
As set out in the MIFIDPRU 1 rule, to be classified as an SNI a firm must not have permission to deal on its own account, not be appointed as a depositary, and operate below each of the following thresholds, failing which the firm would be classed as a non-SNI firm:
| Measure | Threshold |
| Assets under management (AUM) | £1.2bn |
| Client orders handled (COH – cash trades) | £100m per day |
| Client orders handled (COH – derivatives) | £1bn per day |
| Assets safeguarded and administered | Zero |
| Client money held | Zero |
| On- and off-balance sheet total | £100m |
| Annual gross revenue from investment services/activities | £30m |
Firms within an ‘Investment Firm Group’ should apply some of the above thresholds on a consolidated basis when determining their IFPR classification. The thresholds to be considered on a consolidated basis are:
- AUM
- COH
- On- and off-balance sheet total
- Annual gross revenue
In addition, a firm will be deemed a ‘large’ non-SNI firm if the value of its balance sheet assets and off-balance sheet items over four years represents a rolling average of more than £300m (for firms without a trading book) – or more than £100m but less than £300m if it has trading book business of over £150m and/or derivatives business of over £100m. This drives additional reporting and disclosure obligations, which we touch on below.
Notification requirements
When a firm is aware that they no longer qualify to be classified as non-SNI, a notification should be made to the FCA under MIFIDPRU 1 Annex 4R as soon as possible. This should be submitted though the Connect system.
A firm will cease to be classified as SNI three months after the crossed threshold was first exceeded if the threshold crossed is AUM, COH, balance sheet and/or revenue.
The crossing of any of the other thresholds may mean an immediate transition from SNI to non-SNI classification.
The firm will need to confirm they are aware of the additional requirements they will be subject to as a non-SNI firm, and that, from the date of ceasing, they have 12 months to comply with the conditions of a non-SNI firm.
Additional and ongoing requirements
As stated above, a firm moving classification from SNI to non-SNI has 12 months to meet the additional requirements applied to non-SNI firms. These are summarised below:
K-factor requirements
Regulatory data reporting
MIFIDPRU 8 disclosures
Remuneration
ICARA
Get in touch
With so many firms growing and rapidly approaching the threshold to no longer be classified as SNI, IQ-EQ is helping firms understand and meet their requirements and notify the regulator when the time comes.
