IFPRU 1.1 Application and Purpose

Application

IFPRU 1.1.1 G RP

There is no overall application for IFPRU. Each chapter or section has its own application statement. However, IFPRU broadly applies in the following manner:

  1. (1)

    only IFPRU 7 (Liquidity) and IFPRU 9 (Public disclosure) apply to an exempt IFPRU commodities firm and IFPRU 8.1 (Prudential consolidation) may apply subject to the conditions in that section; and

  2. (1A)

    IFPRU 101 (Capital buffers) applies to an IFPRU investment firm, unless it is an:

    1. (a)

      exempt IFPRU commodities firm; or

    2. (b)

      IFPRU limited-licence firm; and

  3. (2)

    other than in (1) and (1A)1, the whole of IFPRU applies to an IFPRU investment firm.

IFPRU 1.1.2 R

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

IFPRU 1.1.3 G RP
  1. (1)

    IFPRU applies to a collective portfolio management investment firm that is an IFPRU investment firm in parallel with IPRU(INV) 11 (see IPRU(INV) 11.6).

  2. (2)

    Generally, IFPRU only applies to a collective portfolio management investment firm'sdesignated investment business (excluding managing an AIF and managing a UCITS). However, IFPRU 2.2 (Internal capital adequacy assessment process) and IFPRU 2.3 (Supervisory review and evaluation process: Internal capital adequacy standards) apply to the whole of its business.

Purpose

IFPRU 1.1.4 G RP
  1. (1)

    The purpose of IFPRU is to implement, in part, CRD and certain national discretions afforded to the FCA as competent authority under EU CRR.

  2. (2)

    Save as provided in the Glossary, any expression in the Handbook for the purpose of IFPRU which is defined or used in EU CRR shall have the meaning given by, or used in, those Regulations.

Exclusion of certain types of firms

IFPRU 1.1.5 R RP

None of the following is an IFPRU investment firm:

  1. (1)

    an incoming EEA firm;

  2. (2)

    an incoming Treaty firm;

  3. (3)

    any other overseas firm;

  4. (4)

    a designated investment firm;

  5. (5)

    a BIPRU firm;

  6. (6)

    an insurer; and

  7. (7)

    an ICVC.

Types of IFPRU investment firm

IFPRU 1.1.6 R RP

An IFPRU investment firm includes a collective portfolio management investment firm that is not excluded under IFPRU 1.1.5 R (Exclusion of certain types of firms).

IFPRU 1.1.7 G RP

In accordance with articles 95 and 96 of EU CRR, IFPRU investment firms are divided into the following categories:

  1. (1)

    full-scope IFPRU investment firm;

  2. (2)

    IFPRUlimited licence firm; and

  3. (3)

    IFPRUlimited activity firm.

Alternative classification of IFPRU investment firms

IFPRU 1.1.8 R RP

IFPRU investment firms are divided into the following classes for the calculation of the base own funds requirement and any other provision of the Handbook that applies this classification:

  1. (1)

    an IFPRU 50K firm;

  2. (2)

    an IFPRU 125K firm;

  3. (3)

    an IFPRU 730K firm; and

  4. (4)

    a collective portfolio management investment firm.

Types of IFPRU investment firm: IFPRU 125K firm

IFPRU 1.1.9 R RP

An IFPRU 125K firm means an IFPRU investment firm that satisfies the following conditions:

  1. (1)

    it does not:

    1. (a)

      deal on own account; or

    2. (b)

      underwrite issues of financial instruments (as referred to in Section A of Annex I of MiFID) on a firm commitment basis;

  2. (2)

    it holds clients' money or securities for investment services it provides or is authorised to do so;

  3. (3)

    it offers one or more of the following services (all as referred to in Section A of Annex I of MiFID):

    1. (a)

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

    2. (b)

      the execution of investors' orders for financial instruments; or

    3. (c)

      the management of individual portfolios of investments in financial instruments;

  4. (4)

    it is not a collective portfolio management investment firm; and

  5. (5)

    it does not operate either2 a multilateral trading facility or an organised trading facility, or both2.

[Note: article 29(1) of CRD]

Types of IFPRU investment firm: IFPRU 50K firm

IFPRU 1.1.10 R RP

An IFPRU 50K firm is a IFPRU investment firm that satisfies the following conditions:

  1. (1)

    the conditions in IFPRU 1.1.9 R(1) and (3);

  2. (2)

    it does not hold clients' money or securities for investment services it provides and is not authorised to do so;

  3. (3)

    it is not a collective portfolio management investment firm; and

  4. (4)

    it does not operate either2 a multilateral trading facility or an organised trading facility, or both2.

[Note: article 29(3) of CRD]

Types of IFPRU investment firm: IFPRU 730K firm

IFPRU 1.1.11 R RP

Meaning of dealing on own account

IFPRU 1.1.12 R RP
  1. (1)

    For the purpose of IFPRU and the EU CRR, dealing on own account means 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).

  2. (2)

    In accordance with article 29(2) of CRD (Definition of dealing on own account), an 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 the following conditions are met:

    1. (a)

      such position only arise as a result of the investment firm's failure to match investors' orders precisely;

    2. (b)

      the total market value of all such positions is no higher than 15% of the investment firm'sinitial capital;

    3. (c)

      (for an investment firm that is an IFPRU investment firm or an EEA firm) it complies with the requirements in articles 92 to 95 (Own funds requirements for investment firms with limited authorisation to provide investment services) and Part Four (Large exposures) of the EU CRR;

    4. (d)

      (for any other investment firm) it would comply with the requirements in (2)(c) if it had been an investment firm on the basis of the assumptions in IFPRU 1.1.13 G (1)(a) and (b); and

    5. (e)

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

  3. (3)

    In accordance with article 29(4) of CRD, the holding on non-trading book positions in financial instruments in order to invest in own funds is not dealing on own account for the purposes of IFPRU 1.1.9 R (Types of IFPRU investment firm: IFPRU 125K firm) and IFPRU 1.1.10 R (Types of IFPRU investment firm: IFPRU 50K firm).

Interpretation of the definition of types of firm and undertaking

IFPRU 1.1.13 G RP

A firm whose head office is not in an EEA State is an investment firm if it would have been subject to the requirements imposed by MiFID (but it is not a bank, building society, credit institution, local firm2, exempt CAD firm and BIPRU firm) if:

  1. (1)

    its head office had been in an EEA State; and

  2. (2)

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

IFPRU 1.1.14 G RP

A firm also falls into one of the categories of an IFPRU investment firm listed in IFPRU 1.1.7 G (Types of IFPRU investment firm) or IFPRU 1.1.8 R (Alternative classification of IFPRU investment firms) if its Part 4A permission contains a requirement that it must comply with the rules in IFPRU applicable to that category of firm. If a firm is subject to such a requirement, and it would otherwise also fall into another category of IFPRU investment firm, it does not fall into that other category.

IFPRU 1.1.15 G RP

For the purposes of the definitions in IFPRU and Part Three, Title I, Chapter 1, Section 2 of the EU CRR (Own funds requirements for investment firms with limited authorisation to provide investment services), a person does any of the activities referred to in IFPRU and the EU CRR if:

  1. (1)

    it does that activity anywhere in the world; or

  2. (2)

    its permission includes that activity; or

  3. (3)

    (for an EEA firm) it is authorised by its Home State regulator to do that activity; or

  4. (4)

    (if the carrying on of that activity is prohibited in a state or territory without an authorisation in that state or territory) that firm has such an authorisation.

IFPRU 1.1.16 G RP

For the purposes of the definitions in IFPRU and Part Three, Title I, Chapter 1, Section 2 of the EU CRR (Own funds requirements for investment firms with limited authorisation to provide investment services), a person offers any of the services referred to in articles 95 and 96 of the EU CRR (Own funds requirements for investment firms with limited authorisation to provide investment services) if:

  1. (1)

    it offers that service anywhere in the world; or

  2. (2)

    any of IFPRU 1.1.15 G(1) to (4) apply.

IFPRU 1.1.17 G RP

For the purposes of the definitions in IFPRU and Part Three, Title I, Chapter 1, Section 2 of the EU CRR (Own funds requirements for investment firms with limited authorisation to provide investment services), a person has an authorisation to do any of the activities referred to in articles 95 and 96 of the EU CRR (Own funds requirements for investment firms with limited authorisation to provide investment services) if any of IFPRU 1.1.15 G(1) to (4) apply.