Dear Clients and Friends,
As we come into the third year of IFPR, the regulator has launched the IFPR newsletter. Perhaps not the most exciting newsletter topic, but the content is useful. Not only does it underscore the broader theme that many firms are still grappling with IFPR compliance, but it also brings together five recurring compliance failings identified by the FCA.
Notification of Changes to Investment Firm Group (‘IFG’) – What’s the FCA saying?
The FCA reminds firms that group structure changes trigger additional IFPR notifications, which are not automatically covered by a change of control notification. Firms are required to inform the FCA as soon as they become aware of the creation of an IFG or any change to their existing IFG. Additionally, the FCA has flagged that omissions from the reporting schedule on RegData are the Firm’s responsibility and failure to cross-check could amount to misreporting.
What is Judd saying?
Make sure you have processes in place to identify group structure changes early enough to meet FCA notification deadlines, whether through the Compliance Monitoring Programme or with the support of a Compliance Consultant.
Don’t assume the Reg Data schedule is correct. It is worthwhile reconciling regulatory return schedules against the Firm’s group structure and regulatory classification. You can alert the FCA on missing Firms within the consolidated group via the MIFIDPRU 2.4.20R return on Connect.
Common Equity Tier 1 (‘CET1’) Items of LLPs – What’s the FCA saying?
The FCA observed that some LLP investment firms are incorrectly counting profits as CET1 Capital. Where members have automatic or unconditional rights to withdraw profits, they are effectively liabilities, notregulatory capital and cannot be used to freely absorb losses. The key test remains whether the partnership has an unconditional right to refuse to make profits available to members. If it does, only then can the retained earnings be used as part of the firm’s regulatory capital.
Finally, the FCA proposes to consolidate the definition of capital for FCA investment firms directly into MIFIDPRU 3, which will reduce cross-references to UK CRR and technical standards. The substantive treatment of capital partnership profits will remain unchanged. However, the FCA is consistently focused on its broader goal of streamlining the rules.
What is Judd saying?
Do not wrongly assume that undistributed or unallocated profits automatically count as retained earnings for CET1 purposes. Unless the LLP agreement explicitly gives the firm the right to withhold profits, they will not qualify as part of Own Funds. Review the LLP agreements closely to ensure the wording supports profits being retained and using them to absorb losses when needed.
Calculation of K-factors, such as K-AUM Requirements – What’s the FCA saying?
The FCA has confirmed that firms should calculate K-AUM using the 12-month period ending three months before the reporting date, therefore excluding the most recent three months.
What is Judd saying?
Review your AUM reporting processes to ensure the correct 12-month period is used for K- AUM calculations. Those most recent months are still submitted via the MIF003 return to reffect recent AUM trends.
ICARA submission and Common Errors on MIF007 Reporting – What’s the FCA saying?
The FCA has identified persistent industry-wide errors around undertaking the ICARA process, governing body approval timing and misreporting the Own Funds Threshold Requirement (OFTR) and the Liquid Assets Threshold Requirement (LATR).
What is Judd saying?
In reality, the OFTR and LATR calculations are straightforward, and it boils down to identifying the largest figure out of a few key numbers. But to ensure data accuracy, internal validation and timely governance approvals should be in place. These are low- hanging fruit, coming down to basic administrative accuracy. Delays or errors of this kind can easily invite regulatory scrutiny that could have been avoided.
Accounts Submissions – What’s the FCA saying?
While UK rules allow certain small, low-risk firms to submit unaudited accounts under the small companies’ regime, this exemption does notapply to MiFID investment firms under the Companies Act. Misunderstanding of this rule seemed pertinent under FCA observation as a preliminary review showed that up to 10% of MiFID firms may have wrongly claimed the small companies’ exemption. Many of these firms do meet the size-based criteria but still do not qualify because they are legally defined as MiFID investment firms.
What is Judd saying?
Ensure your firm is submitting the correct type of accounts, in line with Companies House and FCA rules and guidance.
In summary, the September 2025 IFPR Newsletter signals that the FCA’s patience may be wearing thin, but now is the chance to fix any errors proactively. This type of communication from the FCA is increasingly used as a firm reminder of the regulator’s expectations. Their observations shouldn’t be ignored; they are the expectations the regulator holds you to.
Judd Advisory Limited
October 2025
