CySEC - Latest Entries: CIRCULARS CIF: C426 - Updates for the new prudential framework of Investment
Following the publication of Circular C426, the Cyprus Securities and Exchange Commission (the "CySEC") wishes therein to remind CIFs that “IFR” and “IFD” will come into force on 26th June 2021 and provide the CIFs with the following updates on 3 main areas.
A. European Banking Authority (‘EBA’) published seven final draft technical standards regarding IFD/IFR On the 16th of December 2020, the EBA published a package of seven final draft Regulatory Technical Standards (RTS) related to the main aspects of the prudential regime in relation to the calculation of the regulatory capital requirements, including technical clarifications on the methodologies to be applied by all types of investment firms. According to the CySEC, the EBA is expected to issue additional final draft RTS
B. Reporting and disclosure requirements under IFR/IFD On the 4th of June 2020, the EBA issued its draft Implementing Technical Standards (ITS) and introduced a set of templates and instructions for class 2 and class 3 investment firms. The EBA will issue the final version of this ITS, along with the final templates, within the upcoming weeks. CySEC expects no major changes and upon issuance of the final version, it will adopt and enhance the templates so as to publish them to the CIFs to use for the calculation of their capital adequacy requirements based on the IFD/IFR.
C. Launch of Consultation Papers and Public hearing by the EBA The EBA launched a public consultation on its new guidelines on remuneration policies and internal governance policies of Investment Firms, which will come into force on 26th June 2021 under IFD/IFR.
The public consultation launched by EBA includes two (2) different Consultation Papers (‘CP’), as follows:
CIFs are invited to send their comments on the above EBA consultation papers by clicking on the ‘send your comments’ button which can be found on the following links (deadline is on the 17th of March, 2021):
The EBA will also hold a public hearing in regards to the above consultation papers, which will take place via conference call on the 17th of February, 2021 from 14:00 to 16:00 (Paris time). The deadline for registration expires on 15th February 2021, at 16:00 (Paris time).
D. Next actions
Taking all of the above into consideration, CIFs are urged to study the IFR/IFD carefully, along with the final draft RTS issued, so as to:
Identify the class they will be categorized at from June 2021,
Familiarise themselves with the new templates and the way their new capital requirement will be calculated,
Identify the data needed to be collected and reported, especially in regards to the calculation of K-Factors,
Review their internal records and systems and make the necessary changes to ensure that the required data for the K-Factors (i.e. assets under management, daily trading flow, clients’ orders held, etc) will be available to calculate their new capital requirements. This information should be readily available at all times.
Finally, CIFs should make their own assessment on the impact that the IFR and IFD will have on their own funds, concentration risk, liquidity risk, disclosure, reporting, remuneration requirements and take the necessary early actions to ensure compliance by the date of entry into force i.e. on 26th June 2021. We remain at your disposal for any assistance you may require regarding the above, please contact us. Written by Constantinos Constantinides, Director of FAI Comply Circular C426