1For the purposes of this chapter, a firm which carries on any regulated claims management activities other than seeking out, referrals and identification of claims or potential claims is:
A firm which carries on no regulated claims management activities other than seeking out, referrals and identification of claims or potential claims is neither a Class 1 firm nor a Class 2 firm, and its prudential resources requirement is specified in CMCOB 7.2.10R.
For the purposes of this chapter, total income only includes income relating to the part of the business which is involved in carrying on regulated claims management activities and ancillary activities.
Where the firm has not yet started to trade, total income is to be calculated based on forecast income included in the budget for the first twelve months’ trading, as submitted with the firm’s application for authorisation.
For the purposes of (1), a firm’s overheads expenditure is to be calculated as follows:
the total of the following items (if they are included in such expenditure) in that period:
staff bonuses, except to the extent that they are guaranteed;
other appropriations of profits and other variable remuneration, except to the extent that they are guaranteed;
shared commission and fees payable which are directly related to commission and fees receivable, which are included within total revenue;
20% of total marketing expenditure; and
other variable expenditure.
Where the firm’s total expenditure in the year ending on its accounting reference date was incurred in a period of less than twelve months, the items in (2)(a) and (2)(b) are to be calculated on a pro-rated basis to produce an equivalent annual amount.
Where the firm has not yet started to trade, the items in (2)(a) and (2)(b) are to be calculated based on forecast expenditure included in the budget for the first twelve months’ trading, as submitted with the firm’s application for authorisation.
advertising across different media channels;
advertising agency fees;
public relations consultancy fees;
expenses for promotions offered in connection with services provided by the firm;
market research and customer surveys;
gifts to customers.
Where, during a period of six months, a firm’s overheads expenditure, calculated according to (2), decreases by 20% or more relative to the overheads expenditure calculated at the last accounting reference date, the firm may recalculate its overheads requirement and therefore its prudential resources requirement accordingly.
For the purpose of the recalculation in (6), the firm’s overheads requirement shall be equal to one third of: