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GACO Webinar 21st September - ICARA - what are the common challenges and pitfalls?

14 August 2023

The Internal Capital Adequacy and Risk Assessment (ICARA) represents the new regulatory centrepiece of the prudential regime for investment firms. ICARA processes should be fully embedded by now, but many firms are still working on their first ICARA document and are understandably seeking guidance and reassurance that their work meets regulatory standards.

The IFPR prescribes prudential standards that are broadly similar to the previous regime but has also introduced new concepts and methodologies. The own funds requirement is based on a permanent minimum amount and fixed overheads for all firms. In addition, non-SNI firms are subject to a component based on ‘k-factors’, a set of coefficients applied to the volume of business activities, aiming to cover the ‘risk of harm’ posed by the firm.

It is worth noting that liquidity is more prominent in the IFPR than under the previous regime as firms must hold a minimum amount of liquid assets and calculate additional resource requirements throughout the economic cycle as well as in wind-down.

Of course, the ICARA is not all new and inherited some concepts from the ICAAP framework such as the forward-looking approach, the centrality of a risk management framework, stress testing and recovery planning. It does however also introduce a number of important new additions.

As with all new regulation it often takes a little time for practical arrangements to bed in and for regulatory expectations to become fully visible to the industry. Firms must understand the requirements, identify potential challenges and pitfalls and adopt best practice in the development of internal processes. This reflects the reality of what is needed in a regulatory transition and the proportionality of the approach to be taken based on the diversity of firms subject to the IFPR.

GACO is therefore were happy to have engaged Claire Cummings to deliver this important and very interesting webinar to further explain what the common challenges and pitfalls are when implementing ICARA. You will find further details on Claire in the below bio.

Claire Cummings Bio

“Claire Cummings is a leading solicitor specialising in law and regulation for fund managers and the crypto industry. She is the founder and managing partner of the law firm Cummings Pepperdine LLP. Claire has built Cummings Pepperdine into a unique offering for alternative investment managers and positioned the firm at the forefront of providing legally-based regulatory advice.

Claire’s work includes advising on FCA, AIFMD, MiFID II and EMIR issues, advising on regulatory issues, drafting regulatory documentation, conducting s.166 investigations, setting up funds and drafting fund documentation, acting for brokers, negotiating derivative documentation, setting up fund managers and drafting shareholder and limited liability partnership agreements.

Claire is on the advisory boards of a crypto exchange and a strategic communications firm specialising in alternative and digital assets, and the main board of an NFT firm. Claire has also acted as compliance officer, MLRO and director of an FCA regulated fund manager and qualified under SIB to trade derivatives.

As a leading expert in law and regulation for asset managers, Claire is a sought after speaker and has published multiple articles on the legal and regulatory issues.

Claire was named as a Top Influencer in London for hedge funds (2&20) in 2022 and 2023 and in 2022 was included in the CityWealth Crypto Top 100. Claire is a CityWealth Woman of the Year 2023 and the Cummings Pepperdine Crypto Questions Podcast is a winner of the CityWealth Podcast of the Year 2023.”