MIFIDPRU 7.8 Reviewing and documenting the ICARA process

1This section applies to a MIFIDPRU investment firm.

1A firm must review the adequacy of its ICARA process:

1. (1)

   at least once every 12 months; and

2. (2)

   irrespective of any review carried out under (1), following any material change in the firm’s business model or operating model.

1. (1)

   1A firm must notify the FCA of the date on which the firm will submit data item MIF007 (ICARA assessment questionnaire) in accordance with:

   1. (a)

      in the case of a non-SNI MIFIDPRU investment firm, MIFIDPRU 9.2.2R; and

   2. (b)

      in the case of an SNI MIFIDPRU investment firm, MIFIDPRU 9.2.4R.

2. (2)

   The submission date that the firm notifies under (1) continues to apply unless the firm notifies the FCA of a change of the submission date in accordance with (3).

3. (3)

   A firm may notify the FCA of a revised submission date for the purpose of (1), provided that the revised date will not result in the firm not submitting data item MIF007 to the FCA for more than 12 months.

4. (4)

   The notifications in (1) and (3) must be submitted through the online notification and application system using the form in MIFIDPRU 7 Annex 6R.

5. (5)

   The FCA may direct a firm to submit data item MIF007 on a different date from the date in (2) to ensure that the FCA has access to appropriate and timely information on the firm’s financial position.

6. (6)

   If the FCA gives a direction to a firm in accordance with (5), the firm must submit data item MIF007 to the FCA on the date specified in that direction until the FCA directs otherwise.

1Where a firm carries out a review of its ICARA process in accordance with MIFIDPRU 7.8.2R(2) following a change in its business model or operating model:

1. (1)

   the firm must submit data item MIF007 to the FCA within 20 business days of the governing body having approved the ICARA document resulting from that review in accordance with MIFIDPRU 7.8.8R; and

2. (2)

   the requirement in MIFIDPRU 7.8.4R to notify the FCA of the submission date of data item MIF007 does not apply to a data item submitted under (1).

1. (1)

   1A firm must document any review carried out under MIFIDPRU 7.8.2R.

2. (2)

   The documentation produced by the firm to comply with (1):

   1. (a)

      may consist of multiple documents, provided that the relationship between them is clear, they are prepared on a consistent basis and they can all be provided to the FCA promptly if requested; and

   2. (b)

      is collectively referred to as the ICARA document.

3. (3)

   The ICARA document must include the following:

   1. (a)

      a clear description of the firm’s business model and strategy and how it aligns with the firm’s risk appetite;

   2. (b)

      an explanation of the activities carried on by the firm, with a focus on the most material activities;

   3. (c)

      where the firm has concluded that the ICARA process is fit for purpose, a clear explanation of why the firm reached this conclusion;

   4. (d)

      where the firm has concluded that the ICARA process requires further improvement, a clear explanation of:

      1. (i)

         the improvements needed;

      2. (ii)

         the steps needed to make those improvements and the timescale for taking them; and

      3. (iii)

         who within the firm is responsible for taking the steps in (ii);

   5. (e)

      a clear explanation of any other changes to the firm’s ICARA process that have occurred following the review and the reasons for those changes;

   6. (f)

      an analysis of the effectiveness of the firm’s risk management processes during the period covered by the review;

   7. (g)

      a summary of the material harms identified by the firm under MIFIDPRU 7.4.13R and any steps taken to mitigate them;

   8. (h)

      an overview of the business model assessment and capital and liquidity planning undertaken by the firm under MIFIDPRU 7.5.2R;

   9. (i)

      a clear explanation of how the firm is complying with the overall financial adequacy rule, including a clear breakdown of the following as at the review date:

      1. (i)

         available own funds;

      2. (ii)

         available liquid assets; and

      3. (iii)

         the firm’s assessment of its threshold requirements;

   10. (j)

       a summary of any stress testing and reverse stress testing carried out by the firm;

   11. (k)

       the levels of own funds and liquid assets that, if reached, the firm has identified under MIFIDPRU 7.5.5R(1) may indicate that there is a credible risk that the firm will breach its threshold requirements;

   12. (l)

       the potential recovery actions that the firm has identified under MIFIDPRU 7.5.5R(2) and 7.5.6G; and

   13. (m)

       an overview of the firm’s wind-down planning under MIFIDPRU 7.5.7R, including:

       1. (i)

          any required actions;

       2. (ii)

          the anticipated timelines for actions to be taken; and

       3. (iii)

          any key assumptions or qualifications.

1. (1)

   1The content of the ICARA document must be reviewed and approved by the firm’s governing body within a reasonable period after the review under MIFIDPRU 7.8.2R has been completed.

2. (2)

   As part of its review under (1), the governing body must specifically review and approve the key assumptions underlying the ICARA document.

1. (1)

   1A firm must keep adequate records of the following:

   1. (a)

      its ICARA document; and

   2. (b)

      the review and approval of the ICARA document by the firm’s governing body under MIFIDPRU 7.8.8R.

2. (2)

   A firm must retain the records in (1) for at least 3 years from the date on which the relevant document was approved.