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BIPRU 1.1 Application

BIPRU 1.1.1G

1There is no overall application statement for BIPRU. Each chapter or section has its own application statement. Broadly speaking however, BIPRU applies in the following manner8:

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  1. (1)

    [deleted]8

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  2. (2)

    [deleted]

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  3. (3)

    to a BIPRU firm;8

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  4. (3A)

    to an IFPRU investment firm, only BIPRU 12 (Liquidity standards); and8

  5. (4)

    in relation to8groups containing such firms:8

    1. (a)

      only BIPRU 12 (Liquidity standards) applies to the group containing any of the firms in (3) and (3A); and8

    2. (b)

      BIPRU as a whole applies to the group containing only the firms in (3).8

BIPRU 1.1.2R

BIPRU applies to a firm in relation to the whole of its business, except where a particular provision provides for a narrower scope.

BIPRU 1.1.2AG
BIPRU 1.1.3G

In the main BIPRU only applies to a collective portfolio management investment firm7 in respect of designated investment business (excluding managing an AIF and managing a UCITS).7 However BIPRU 2.2 (Internal capital adequacy standards), BIPRU 2.3 (Interest rate risk in the non-trading book), BIPRU 8 (Group risk - consolidation) and BIPRU 11 (Disclosure) apply to the whole of its business.

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Purpose

BIPRU 1.1.4G

BIPRU 1.1 implements in part the third paragraph of article 95(2) of the EU CRR that permits the FCA to apply the Banking Consolidation Directive and8 the Capital Adequacy Directive.

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The definition of a BIPRU firm

BIPRU 1.1.7R

None of the following is a BIPRU firm:

8
  1. (1)

    an incoming EEA firm;

  2. (2)

    an incoming Treaty firm;

  3. (3)

    any other overseas firm;

  4. (4)

    an ELMI;

  5. (5)

    an insurer; and

  6. (6)

    an ICVC.

BIPRU 1.1.7AG

8In summary, a BIPRU firm:

  1. (1)

    does not provide the ancillary service of safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management, and is not authorised to do so;

  2. (2)

    is not authorised to provide the following investment services:

    1. (a)

      to deal in any financial instruments for its own account;

    2. (b)

      to underwrite issues of financial instruments on a firm commitment basis;

    3. (c)

      to place financial instruments without a firm commitment basis; and

    4. (d)

      to operate a multilateral trading facility;

  3. (3)

    is authorised to provide one or more of the following investment services:

    1. (a)

      the execution of investors' orders for financial instruments; or

    2. (b)

      the management of individual portfolios of investments in financial instruments;

  4. (4)

    may be authorised to provide one or more of the following investment services:

    1. (a)

      reception and transmission of investors' orders for financial instruments; or

    2. (b)

      investment advice; and

  5. (5)

    does not hold clients' money and/or securities and is not authorised to do so (it should have a limitation or requirement prohibiting the holding of client money and its permission should not include safeguarding and administering investments).

BIPRU 1.1.10G
  1. (1)

    This paragraph applies to an undertaking that would be a third country BIPRU firm if it were authorised under the Act.

  2. (2)

    Except in exceptional circumstances, it is the appropriate regulator's policy that it will not give an overseas applicant a Part 4A permission unless the appropriate regulator is satisfied that the applicant will be subject to prudential regulation by its home state regulatory body that is broadly equivalent to that provided for in the Handbook and the applicable EEA prudential sectoral legislation. The appropriate regulator will take into account not only the requirements to which the firm is subject but how they are enforced. The appropriate regulator will also take into account the laws, regulations and administrative provisions to which it is subject in its home state. The reasons for that policy include:

    1. (a)

      it is unlikely that a firm that is not subject to equivalent supervision will be able to satisfy the threshold conditions (and in particular threshold condition 5 (Suitability)) and it is unlikely that it will be possible to establish that the firm does satisfy them; and8

    2. (b)

      such a firm is likely to pose a threat to the interests of consumers and potential consumers, particularly as effective supervision of an overseas firm depends on cooperation between the appropriate regulator and the regulatory body that authorises the firm in its home country and on the appropriate regulator being able to place appropriate reliance on the supervision carried out by such regulatory body.8

    3. (c)

      [deleted]8

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  3. (3)

    If an undertaking is not subject to equivalent supervision in its home state and it wishes to carry on in the United Kingdom regulated activities coming within the scope of the activities that define a BIPRU firm it should establish a subsidiary undertaking in the United Kingdom. Such a subsidiary undertaking should be able to show, amongst other things, how it would comply with the threshold conditions (and in particular threshold conditions 3 (Close links) and 5 (Suitability)).

  4. (4)

    If in exceptional circumstances the appropriate regulator does grant a Part 4A permission to an undertaking that is not subject to equivalent prudential regulation the appropriate regulator is likely to take measures under the regulatory system to compensate for the lack of equivalent supervision. These may include applying the prudential requirements for BIPRU firms to the firm.

  5. (5)

    An overseas firm that is subject to equivalent supervision is subject to the threshold conditions and the Principles. BIPRU and GENPRU do not generally apply.

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Meaning of dealing on own account

BIPRU 1.1.23R
  1. (1)

    Dealing on own account means (for the purpose of GENPRU and BIPRU) the service of dealing in any financial instruments for own account as referred to in point 3 of Section A of Annex I to MiFID, subject to (2) and (3).9

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  2. (2)

    In accordance with article 5(2) of the Capital Adequacy Directive (Definition of dealing on own account), a CAD investment firm that executes investors' orders for financial instruments and holds such financial instruments for its own account does not for that reason deal on own account if all of the following conditions are met:9

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    1. (a)

      such position only arises as a result of the CAD investment firm's failure to match investors' order precisely;9

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    2. (b)

      the total market value of all such positions is no higher than 15% of the CAD investment firm's initial capital;9

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    3. (c)

      (in the case of a BIPRU firm) it complies with the main BIPRU firm Pillar 1 rules;9

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    4. (d)

      (in the case of a CAD investment firm that is an EEA firm) it complies with the CRD implementation measures of its Home State for Articles 18 and 20 (Minimum capital requirements) of the Capital Adequacy Directive;9

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    5. (e)

      (in the case of any other CAD investment firm) it would comply with the rules in (2)(c) if it had been a BIPRU firm on the basis of the following assumptions:9

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      1. (i)

        9its head office had been in an EEA State; and

      2. (ii)

        9it had carried on all its business in the EEA and had obtained whatever authorisations for doing so as are required under MiFID; and

    6. (f)

      such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.9

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  3. (3)

    In accordance with article 5(2) of the Capital Adequacy Directive, the holding of non-trading book positions in financial instruments in order to invest capital resources is not dealing on own account for the purposes referred to in article 4(1)(2)(c) of the EU CRR (see BIPRU 1.1.7A G).9

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