Lens on the IFR&IFD Regime:
Potential implications for reporting answered in 3 questions
Within the euro area, the non-banking sector currently accounts for 55% of the financial sector, compared to 14% thirteen years ago- in 2008. Whereas the foremost regulatory focus has been on the importance of supervision over the banking and insurance sectors, non-banking entities have become significant players and contributors to the financial landscape as a whole. This, coupled with drivers of change, such as innovation sweeping through the financial landscape and the increasing number of digitally provided services, has triggered regulatory changes to encompass these trends. As a result, investment firms within the EU will fall under regulations specified by the Investment Firms Regulation and Directive (IFR&IFD) from 26 June 2021.
How will this affect investment firms?
I am a Class 2 or Class 3 investment firm. What is the timeline of the IFR&IFD regime?
The first deadline is June 26, 2021, when the IFR&IFD regime begins to apply to investment firms. Notably, the UK will adopt a regime similar to the EU, referred to as IFPR from January 1, 2022.
In terms of reporting, investment firms which fall under Class 2 will be obliged to report the new regulatory returns starting September 30, 2021 and file the first submissions by November 11, 2021 and then file on a quarterly basis.
Investment firms which fall under Class 3 will first be obliged to report from December 31,2021 and submit the first return by February 11,2022 and file on an annual basis.
- What do you need to watch out for?
If you are a Class 3 firm, the constant monitoring of thresholds specified in the IFR&IFD regime is necessary to ensure that the investment firm in fact falls under Class 3. In any of the thresholds are breached, then the investment firm is placed under Class 2, therefore falling under the full IFR&IFD regime.
How will this impact the reporting of investment firms?
Ø More frequent reporting for Class 2 investment firms
Ø The need for Class 2 investment firms to source data that has not been requested before in regulatory reporting proceedings
Ø The need to constantly monitor thresholds set out by “K-Factors” to ensure the firm is classified correctly and prepared to disclose the information immediately on request of the relevant authority
Ø Ensuring the firms’ internal data software systems are prepared for the June 2021 deadline and the first obligatory reporting dates with daily access to data sets that require constant monitoring