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BIPRU TP 15 Commodities firm transitionals: Exemption from capital requirements

1Application

15.1

R

Subject to BIPRU TP 15.2R, BIPRU TP 15 applies to a BIPRU investment firm:

(1)

whose main business consists exclusively of the provision of investment services or investment activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to the MIFID; and

(2)

to whom the ISD would not have applied if it had remained in force in the form it was in on 31 December 2006.

15.2

R

BIPRU TP 15.13R to BIPRU TP 15.14G apply to any firm to which BIPRU 8 (Group risk - consolidation) applies.

Purpose

15.3

G

BIPRU TP 15 implements Article 48(1) of the Capital Adequacy Directive.

Duration of exemption

15.4

R

BIPRU TP 15 applies until 31 December 2010.

15.5

G

If there are any modifications pursuant to paragraphs 2 and 3 of Article 48 of the Capital Adequacy Directive (European Commission review of prudential regime for exempt commodity firms), the FSA will revoke BIPRU TP 15 if the date of coming into force of the implementing measures in relation to those changes is before the date in BIPRU TP 15.4R.

Exemption

15.6

R

The provisions of GENPRU and BIPRU on capital requirements and GENPRU 1.2 (Adequacy of financial resources) do not apply to a firm to which BIPRU TP 15 applies. However BIPRU 10 (Concentration risk requirements) continues to apply, including the CNCOM.

15.7

G

If a firm meets the conditions in BIPRU TP 16 (Commodities firm transitionals: large exposures) it will be exempt from BIPRU 10 as well.

15.8

G

An exempt BIPRU commodities firm (which is the name in the Glossary given to a firm with the benefit of the exemption in BIPRU TP 15.6R) may be subject to the requirements of Chapter 3 of IPRU(INV). Details of which exempt BIPRU commodities firm are subject to those requirements can be found in Chapter 3 of IPRU(INV).

15.9

G

The table in BIPRU TP 15.10G provides an indication of which parts of GENPRU and BIPRU generally apply to an exempt BIPRU commodities firm and which parts in general do not apply. If a section is shown as not in general applying the table also identifies any significant aspects of that section that do apply.

15.10

G

Table: Parts of GENPRU and BIPRU that apply to exempt BIPRU commodities firms

This table belongs to BIPRU TP 15.9G

GENPRU and BIPRU provisions

A Y denotes that the provision generally does apply

An N denotes that generally it does not apply

Remarks

GENPRU TP (Transitional provisions)

Y

GENPRU 1.1 (Application and scope)

Y

GENPRU 1.2 (Adequacy of financial resources)

N

GENPRU 1.3 (Valuation)

Y

GENPRU 1.4 (Actions for damages)

Y

GENPRU 1.5 (Application of GENPRU 1 to Lloyd's)

Not applicable as does not apply to BIPRU firms

GENPRU 2.1 (Calculation of capital resources requirements)

N

GENPRU 2.2 (Capital resources)

Y

This applies for the purposes of BIPRU 10. If BIPRU 10 does not apply this does not apply either.

GENPRU 2.3 (Application of GENPRU 2 to Lloyd's)

Not applicable as does not apply to BIPRU firms

GENPRU 3.1 (Cross sector groups)

Y

Only applies if the firm is a member of a financial conglomerate

GENPRU 3.2 (Third-country groups)

Y

Provisions about financial conglomerate only apply if the firm is a member of a financial conglomerate

See remarks on BIPRU 8 for provisions about a third-country banking and investment group

BIPRU TP (Transitional provisions)

Y

BIPRU 1.1 (Application and scope)

Y

BIPRU 1.2 (Definition of the trading book)

Y

BIPRU 1.3 (Application for advanced approaches)

N

Provisions about BIPRU 2.1 and BIPRU 8 apply to the extent those parts of BIPRU apply. Otherwise does not apply.

BIPRU 1.4 (Actions for damages)

Y

BIPRU 2.1 (Solo consolidation)

Y

Applies for the purposes of BIPRU 10.

BIPRU 2.2 (Adequacy of financial resources)

N

BIPRU 2.3 (Interest rate risk in the non-trading book)

N

BIPRU 3 (Standardised approach to credit risk)

N

BIPRU 4 (The IRB approach)

N

BIPRU 5 (Credit risk mitigation)

N

BIPRU 6 (Operational risk)

N

BIPRU 7 (Market risk)

N

BIPRU 7.8.38 R and BIPRU 7.3.39 R (Risk management systems and controls) apply in theory although it is unlikely that a firm will be able to carry out these activities without losing the exemption in BIPRU TP 15.

BIPRU 8 (Group risk - consolidation)

Y

See BIPRU TP 15.13R to BIPRU TP 15.14G

BIPRU 9 (Securitisation)

N

BIPRU 9.1.6R to BIPRU 9.1.8G (Risk systems) apply

BIPRU 10 (Concentration risk)

Y

If firm also qualifies for exemption under BIPRU TP 16 (Commodities firm transitionals: large exposures) BIPRU 10 does not apply except as described in BIPRU TP 16.7G

BIPRU 11 (Disclosure)

Y

BIPRU 12

Chapter does not yet exist

BIPRU 13 (Financial derivatives, SFTs and long settlement transactions)

N

BIPRU 14 (Capital requirements for settlement and counterparty risk)

N

15.11

G

SYSC applies to an exempt BIPRU commodities firm.

Definitions

15.12

R

The terms financial instrument, investment services and investment activities have the same meaning as they do in the MIFID.

Consolidation

15.13

R

BIPRU TP 15 does not apply for the purposes of BIPRU 8 with respect to a firm's UK consolidation group or, as the case may be, non-EEA sub-group unless the following conditions are satisfied:

(1)

there is no credit institution in that group;

(2)

each investment firm in the group meets the conditions in BIPRU TP 15.1R(1);

(3)

each investment firm whose head office is in an EEA State satisfies the conditions in BIPRU TP 15.1R(2); and

(4)

any investment firm whose head office is outside the EEA would have fallen into BIPRU TP 15.1R(2) if:

(a)

its head office had been in an EEA State; and

(b)

it had carried on all its business in the EEA and had obtained whatever authorisations for doing so were required under the ISD in the form that Directive was in on 31 December 2006.

15.14

G

If an exempt BIPRU commodities firm is a member of a group that meets the conditions in BIPRU TP 15.13R, BIPRU 8 will not apply to the group. Chapter 14 of IPRU(INV) (Consolidation) applies instead.