The FCA’s proposals for public disclosures under IFPR published in CP21/26 changes their previously stated position that “the benefit of disclosure is greatest when it applies to an investment firm that deals on its own account or issues securities…”.
FCA now wants all investment firms to make some public disclosure. For Small Non Interconnected Firms (“SNIFs”), this will include publishing quantitative totals for fixed and variable remuneration and information on remuneration policies and practices. More extended remuneration disclosures will apply to non-SNIFs. along with qualitative and quantitative disclosures covering Own Funds, Own Funds Requirement, Risk Management and Governance (Risk Committee, Diversity and external directorships).
The FCA will not provide an overall disclosure template but is prescribing formats in limited circumstances. Disclosures will be required in an easily found and accessible part of the firm’s website or, if there is no website, “freely available” e.g. in an annual report. Disclosures must be published annually, alongside the annual financial statements.
We are unconvinced that public disclosure is an effective tool in mitigating the harms the FCA wants to prevent. Once a firm the FCA regulates has become insolvent, lost money for investors and is requiring a claim on the FSCS, few will be concerned with how accurately the firm summarised its potential business model harms on its website.
Small firms may find the remuneration disclosures a risk to their confidentiality. They may want to ask the FCA for a minimum employee or amount threshold before remuneration disclosures need to be made. Consultation closes 17 September 2021.
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