On 16 April, the European Parliament adopted in Plenary a Regulation on the prudential requirements for investment firms (IFR) and a Directive on the prudential supervision of investment firms (IFD). IFR/IFD introduces a new prudential regime for certain investment firms, tailored to their activities and asset size. While many investment firms will see a tailored regime as a positive step, the implications of the new regime will differ from firm to firm. Each firm will need to assess what the regime change means for it and take action accordingly. IFR/IFD also revises the MiFID II/MiFIR third-country regime for investment services. This blog provides a summary of the changes contained in IFR/IFD.
We expect publication in the Official Journal around Q3 2019. IFR/IFD will apply 18 months after entry into force, although firms should note that the texts contain additional detail on timelines, for example, on a transitional period for “class 2 and 3” firms to adjust to the new prudential regime.
In many areas, key implications will not be known fully until the supporting delegated acts, implementing acts and technical standards are developed. Therefore, it may be some time before firms truly understand what the rule changes mean for them and how well the new made-to-measure prudential regime really fits.