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IPRU-INV 13.13 CAPITAL RESOURCES REQUIREMENT FOR AN EXEMPT CAD FIRM AND A CATEGORY B FIRM

Application

IPRU-INV 13.13.1R

1This section applies to a personal investment firm which is either:

  1. (1)

    an exempt CAD firm; or

  2. (2)

    a category B firm1.

Requirement

IPRU-INV 13.13.2R
  1. (1)

    A firm to which MIPRU does not apply must calculate its capital resources requirement as in (2).

  2. (2)

    The firm must calculate its capital resources requirement as the higher of:

    1. (a)

      £20,000; and

    2. (b)

      the amount equivalent to the applicable percentage of its annual income specified in table 13.13.2(2)(b), depending on the type of firm.

Table 13.13.2(2)(b)

This table forms part of IPRU-INV 13.13.2R.

(A)

(B)

Type of firm

(C)

Applicable percentage of annual income

(1)

Exempt CAD firm

5%

(2)

Category B1 firm

10%

(3)

Category B2 firm

10%

(4)

Category B3 firm which is permitted to carry on the activity of managing investments in respect of portfolios containing only life policies or to delegate such activity to an investment firm

10%

(5)

Category B3 firm not in (4)

5%

IPRU-INV 13.13.3R
  1. (1)

    A firm to which MIPRU also applies must calculate its capital resources requirement as in (2).

  2. (2)

    The firm must calculate its capital resources requirement as the higher of:

    1. (a)

      £20,000; and

    2. (b)

      the sum of:

      1. (i)

        the amount that would have applied to it under IPRU-INV 13.13.2R(2)(b) if it were a firm of the type in column (B) of table 13.13.2(2)(b); and

      2. (ii)

        the capital resources requirement in MIPRU 4.2. (Capital resources requirements), after excluding the fixed amounts specified in table 13.13.3(2)(b)(ii).

Table 13.13.3(2)(b)(ii)

This table forms part of IPRU-INV 13.13.3R.

Activity

Provision

Fixed amount

Insurance mediation activity or home finance mediation activity

MIPRU 4.2.11R(1)(a) (firm not holding client money or assets)

£5,000

MIPRU 4.2.11R(2)(a) (firm holding client money or assets)

£10,000

Home financing and home finance administration (not connected to regulated mortgage contracts)

MIPRU 4.2.12R(1)(a)

£100,000

Home finance administration (with all assets off balance sheet)

MIPRU 4.2.19R(1)

£100,000

Home financing and home finance administration (connected to regulated mortgage contracts)

MIPRU 4.2.23R(1)

£100,000

IPRU-INV 13.13.4G
  1. (1)

    IPRU-INV 13.13.4G(2) illustrates how a firm that is subject to this section and MIPRU calculates its capital resources requirement under IPRU-INV 13.13.3R.

  2. (2)

    Example: A category B3 firm with annual income of £300,000 under this section and £100,000 from its home finance mediation activity (without holding client money) should calculate capital resources requirement as specified in table 13.13.4G(2).

Table 13.13.4G(2)

This table forms part of IPRU-INV 13.13.4G.

Requirement

Calculation

Amount

The capital resources requirement is the higher of:

(1) £20,000; and

£20,000

£20,000

(2) The sum of:

(a) the amount that would have applied to it under IPRU-INV 13.13.2R(2)(b) if it were a firm of the type in column (B) of table 13.13.2(2)(b); and

As this is a category B3 firm, the applicable calculation is 5% of £300,000.

£15,000

(b) the capital resources requirement in MIPRU 4.2. (Capital resources requirements), after excluding the fixed amounts specified in table 13.13.3(2)(b)(ii).

For a firm carrying on home finance mediation activity without holding client money, MIPRU 4.2.11R(1) specifies a requirement of 2.5% of £100,000 (excluding the amount of £5,000 in MIPRU 4.2.11R(1)(a)).

£2,500

Total of part (2) of the capital resources requirement, which is £15,000 plus £2,500.

£17,500

The capital resources requirement is the higher of part (1), which is £20,000, and part (2), which is £17,500.

£20,000

IPRU-INV 13.13.5R

1A firm whose permission includes establishing, operating or winding up a personal pension scheme must calculate its capital resources requirement as the sum of:

  1. (1)

    the capital resources requirement that is applied under IPRU-INV 13.13.2R(2) or IPRU-INV 13.13.3R(2); and

  2. (2)

    the financial resources requirement calculated in accordance with IPRU-INV 5 (Investment Management Firms).