IPRU-INV 11.6 ADDITIONAL REQUIREMENTS FOR COLLECTIVE PORTFOLIO MANAGEMENT INVESTMENT FIRMS

A collective portfolio management investment firm is required to comply with

the applicable requirements of either of the following sourcebooks in addition to complying with IPRU-INV 11:

1. (1)

   GENPRU and BIPRU if it is a BIPRU firm; or

2. (2)

   IFPRU if it is IFPRU investment firm.

1. (1)

   A collective portfolio management investment firm may undertake the following MiFID business: portfolio management; investment advice; safekeeping and administration in relation to shares or units of collective investment undertakings; and (if it is an AIFM investment firm) reception and transmission of orders in relation to financial instruments.

2. (2)

   Subject to the conditions that the firm is not authorised to provide safekeeping and administration in relation to shares or units of collective investment undertakings and is not permitted to hold client money or client assets in relation to its MiFID business (and for that reason may not place itself in debt with those clients) competent authorities may allow the firm to stay on the capital requirements that would be binding on that firm as at 31 December 2013 the UK legislation that implemented1 under the Banking Consolidation Directive and the Capital Adequacy Directive (in line with article 95(2) of the UK CRR1). The FCA 1exercised this derogation and, as such, a firm meeting those conditions is a BIPRU firm. If the above conditions are not met, a collective portfolio management investment firm is an IFPRU investment firm.

A collective portfolio management investment firm is required to comply with the applicable requirements of

the sourcebooks set out in IPRU-INV 11.6.1G, in parallel with its requirements under IPRU-INV 11. This means that a capital instrument may be used to meet either or both sets of requirements provided it meets the conditions set out in the relevant sourcebook.

1. (1)

   When a collective portfolio management investment firm that is a BIPRU firm calculates the credit risk capital requirement and the market risk capital requirement for the purpose of calculating the variable capital requirement under GENPRU 2.1.40R it must do so only in respect of designated investment business. For this purpose, managing an AIF or managing a UK UCITS2 is excluded from designated investment business.

2. (2)

   Generally, BIPRU only applies to a collective portfolio management investment firm that is a BIPRU firm in respect of its designated investment business (excluding managing an AIF and managing a UK UCITS2). 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.

1. (1)

   When a collective portfolio management investment firm that is an IFPRU investment firm calculates the total risk exposure amount in article 92(3) of the UK CRR21, the own funds requirements referred to in article 92(3)(a) (Risk weighted exposure amount for credit risk and dilution risk) and article 92(3)(b) (Risk weighted exposure amount for position risk) should include only those arising from its designated investment business. For this purpose, managing an AIF or managing a UK UCITS2 is excluded from designated investment business.

2. (2)

   Generally, IFPRU only applies to the designated investment business (excluding managing an AIF and managing a UK UCITS2) of a collective portfolio management investment firm that is an IFPRU investment firm. However, IFPRU 2.2 (Internal capital adequacy standards) and IFPRU 2.3 (Supervisory review and evaluation process: Internal capital adequacy standards) apply to the whole of its business.