It is now a year since the launch of the Investment Firms Prudential Regime (IFPR) at the start of 2022, bringing a simpler, more proportionate framework for investment firms while supporting the FCA's drive to build financial resilience and mitigate harm to consumers, investors, and firms.
The centrepiece of this is the ICARA process, which replaced the ICAAP regime for these firms. It is a harms-driven approach that identifies and mitigates threats to clients and other market participants, as well as firms themselves.
This culminates in an annual questionnaire submission, with the original date self-selected by each investment firm back in November 2021. The leniency window that allowed firms to push that date back is ending, and the strict rule going forward is that the period between ICARA submissions cannot be less than twelve months.
With the first ICARA questionnaire now completed, firms should use this point to reflect and revise that self-imposed deadline based on year-one experience.
Time to reflect
As these regulations were new in 2022, many firms were uncertain about the complexity and exact level of work required. Mike Chambers, Head of Prudential at Centralis GRC, noted that some firms were likely caught unaware when the FCA IFPR set-up questionnaire in November 2021 required them to fix their own ICARA deadline.
Setting this annual delivery date without fully understanding the workstream, personnel demands, and timeline critical path has meant some firms would benefit from reassessment. This was especially, though not exclusively, true for firms previously outside the ICAAP regime.
As a result, many firms may in hindsight have set an unhelpful date and found that gathering reporting information took longer than expected, pulling key personnel away from other business objectives.
Multiple deadlines
Some firms then compounded pressure by facing a cluster of immovable deadlines in close succession. The FCA rules do allow firms to move the ICARA questionnaire submission date, but with an important limitation: it can be brought forward but not pushed back.
Centralis GRC advises firms to think carefully about what the project will entail each year: how much lead time is needed, and what other deadlines sit in that same window.
For example, firms with a December year-end may find that year-end and audit procedures dominate relevant resources through April. If the ICARA reference date is aligned to the financial year-end, then a June submission may help keep the time between data capture and submission reasonable. Alternatively, uncoupling the ICARA reference date from the financial year-end may provide more flexibility and allow firms to choose a deadline and lead-up period that works best overall.
Firms should avoid submitting stale data, and the self-selected deadline is pivotal to achieving that. Centralis GRC recommends bringing the date forward only after careful consideration of availability and overlapping obligations, since it will not be permissible to push it back later.
If you would like to discuss your options, please contact Michael Chambers, Head of Prudential, at micheal.chambers@centralisgroup.co.uk.