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IPRU-INV 13.10.1R

A Category B firm's own funds must at all times be at least £10,000.


IPRU-INV 13.10.2R

A Category B firm's own funds must be calculated in accordance with table 13.10(2).

Table 13.10(2).

This table forms part of rule 13.10.2



Sole Traders: Partnerships

Paid-up share capital (excluding preference shares redeemable by shareholders within 2 years)

Eligible LLP members' capital

Share premium account

Retained profits (see 13.10.2AR) and

interim net profits (Note 1)

Revaluation reserves

Short-term subordinated loans

Debt capital

Balances on proprietor's or partners'

- capital accounts

- current accounts

(see 13.10.2AR)

Revaluation reserves

Short-term subordinated loans


- Intangible assets

- Material current year losses

- Excess LLP members' drawings


- Intangible assets

- Material current year losses

- Excess of current year

- drawings over current year profits

Note 1 Retained profits must be audited and interim net profits must be verified by the firm's external auditor, unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 294A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

IPRU-INV 13.10.2AR

For the purpose of calculating a Category B firm's own funds, the following adjustments apply to retained profits or, (for non-corporate entities), current accounts figures.

  1. (1)

    a Category B firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

  2. (2)

    a Category B firm must derecognise any defined benefit asset;

  3. (3)

    a Category B firm may substitute for a defined benefit liability its deficit reduction amount. The election must be applied consistently in respect of any one financial year.

  4. (4)

    a Category B firm must deduct any unrealized gains on investment property and include these within revaluation reserves.

  5. (5)

    where applicable, a Category B firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but exclude from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax.

IPRU-INV 13.10.2BG

A firm should keep a record of and be ready to explain to its supervisory contacts in the FSA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.

Where a Category B firm is a sole trader or a partnership:

  1. (1)

    it can use (to the extent necessary to make up any shortfall in the required resources) any of its personal assets (not being needed to meet liabilities arising from its personal activities and any business activities not regulated by the FSA);

  2. (2)

    the firm's total financial resources, from whatever source, must at all times be sufficient to cover its total liabilities.

IPRU-INV 13.10.3R
  1. (1)

    Where a Category B3 firm with 1-25 advisers has a facility under the PASS Loan Agreement Scheme it may make an adjustment in its own funds calculation in accordance with (2).

  2. (2)

    a firm in (1) can regard as additional to its own funds the lower of either:

    1. (a)

      the amount of the loan facility agreed (less any loan repayments already made and less the amount of the facility withdrawn or lapsed); or

    2. (b)

      the amount of the firm's provision for redress (net of any professional indemnity insurance recoverable) at the time of its application for the loan facility.