British regulators are looking to follow through on new capital requirements for advisory firms that were put on hold amid changes to compensation structures and advisor proficiency requirements.
The U.K. Financial Conduct Authority (FCA) launched a consultation on Thursday on capital requirements for personal investment firms (PIFs).
Prudential requirements for PIFs were meant to ensure that firms have sufficient resources to absorb losses and to pay any required redress to clients.
They were initially proposed alongside the FCA’s Retail Distribution Review (RDR), as part of the regulator’s efforts to bolster investor protection for retail clients.
However, the FCA ultimately decided to defer implementation of these rules pending further review.
Now, the U.K. regulator is reintroducing the idea.
The purpose of the proposals remains to “require a proportionate level of capital resources” for PIFs to ensure they can handle routine losses, meet redress claims against them, and to ensure they can “make appropriate arrangements” if they decide to exit the market, the FCA notes.
The FCA is proposing a new minimum capital resources requirement of £20,000, and the introduction of a new income-based capital requirement (representing 5% of annual investment business income for most firms).
The new requirements are expected to come into force by June 30 2016, subject to a two-year transition period.
Comments on the proposals are due by Sept. 7.