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IPRU-INV 12.1 APPLICATION AND PURPOSE

Application

IPRU-INV 12.1.1R
IPRU-INV 12.1.2G

This chapter amplifies the threshold condition 2D (Appropriate resources) by providing that a firm must meet, on a continuing basis, a basic solvency requirement. This chapter also builds on Principle 4 which requires a firm to maintain adequate financial resources1 by setting out appropriate requirements for a firm according to what type of firm it is.

IPRU-INV 12.1.3G

Prudential standards have an important role in minimising the risk of harm to consumers by requiring a firm to behave prudently in monitoring and managing business and financial risks.

IPRU-INV 12.1.4G

More generally, having adequate financial resources1 gives the firm a degree of resilience and some indication to consumers of creditworthiness, substance and the commitment of its owners. The rules in this chapter aim to ensure that a firm has financial resources1 which can provide cover for operational and compliance failures and pay redress, as well as reducing the possibility of a shortfall in funds and providing a cushion against disruption if the firm ceases to trade.

Relevant accounting principles

IPRU-INV 12.1.5R

A firm must recognise an asset or liability, and measure its amount, in accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise.

Actions for damages

IPRU-INV 12.1.6R

A contravention of the rules in this chapter does not give rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).

Interpretation

IPRU-INV 12.1.7R

1The definitions in the glossary at IPRU-INV 12 Appendix 1 apply to terms shown in bold type this chapter. Where the term is italicised, the FCA Handbook Glossary definition applies.