The end of the summer is fast approaching. Professionals lucky enough to catch flights this summer will be returning to packed schedules. High on the agenda for many a senior manager or non-executive director at Financial Conduct Authority (“FCA”) regulated investment firms will be reviewing and approving the output of their firm’s inaugural Internal Capital Adequacy and Risk Assessment (“ICARA”) process. This is because many firms are expected to submit their first ICARA Questionnaire (aka MIF007) between September and December 2022. If your firm is yet to prepare its ICARA process documentation, or its senior management review finds it requires an upgrade, then read on.
What our framework includes
Our framework includes five components which are summarised in the table blow.
| Component | Description |
| ICARA framework | Outline framework written to address the FCA’s expectations in the Prudential Sourcebook for MiFID Investment Firms (“MIFIDPRU”). Includes:
The framework can cater for small and non-interconnected (“SNI”) and non-small and non-interconnected firms (“non-SNI”). The framework is designed so firms can work through methodically to include or exclude items that are / are not relevant to them. |
| Remuneration policy framework | Builds on the FCA’s remuneration policy statement outline. Provides examples of measures firms could consider adopting to meet wider expectations, for example in relation to conduct and culture. |
| Public disclosures | Outline disclosures that a firm can adapt to its own business model and publish (usually on its website) once it has finalised its ICARA and related processes, covering:
|
| Risk register | A risk register template that can be used by firms to document:
Once complete, a firm can select the most material harms for inclusion in the ICARA process. |
| Training course for senior managers and non-executive directors | An optional extra, this component involves a representative of C&G providing a training session (or sessions) to senior managers, non-executive directors and other relevant personnel to:
The training can be provided in person (recommended to aid interactivity) or online. |
To whom is the framework likely to be most beneficial?
The framework is most likely to be beneficial to small and medium-sized investment firms, particularly those who:
- were not required to complete an Internal Capital Adequacy Assessment Process (“ICAAP”) document in the past, for example “exempt CAD” firms;
- produced an ICAAP suite but perhaps feel it could have benefitted from significant enhancement or revision; or
- are currently considering seeking authorisation from the FCA for the first time.
What our framework does not do
Our prudential framework will save your firm a lot of time, particularly if researching the relevant rules and guidance feels daunting. However, it does not constitute an “off the shelf” product that can simply be bought and passed off as a complete ICARA. This is not possible because the FCA expects a firm’s ICARA process to be:
- tailored to its specific business model; and
- considerate of the harms arising from that business model.
Furthermore, the framework does not automatically produce capital calculations, for example for the own funds threshold requirement. These are an outcome of performing the ICARA process.
Notwithstanding the above, our consultants can work with your firm to tailor the ICARA framework to its business model. This is most cost-effective if done as part of a subscription plan which offers a discount on our hourly rates to clients.
Who should I contact if I would like more information?
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