IPRU-INV 13.14 CALCULATION OF ANNUAL INCOME FOR AN EXEMPT CAD FIRM AND A CATEGORY B FIRM

Application

IPRU-INV 13.14.1R

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

  1. (1)

    an exempt CAD firm;

  2. (2)

    a category B firm1.

Annual income

IPRU-INV 13.14.2R

This section applies to a firm when it calculates annual income for its capital resources requirement.

IPRU-INV 13.14.3R
  1. (1)

    Annual income” is the annual income from the firm’s designated investment business as given in its reporting form in (3) drawn up at its most recent accounting reference date.

  2. (2)

    In (1), the most recent accounting reference date is the last one for which the firm reported annual income.

  3. (3)

    The relevant reporting form under SUP 16.12 is:

    1. (a)

      the Retail Mediation Activities Return (RMAR) (Section B: Profit and Loss Account) for a category B firm; and

    2. (b)

      FSA030 (Income Statement) for an exempt CAD firm.

  4. (4)

    If the firm’s most recent reporting form does not cover a 12-month period, the annual income is derived by converting the amount reported, proportionally, to a 12-month period.

  5. (5)

    If the firm does not yet have a reporting form under (1), the annual income is taken from the forecast or other appropriate accounts which the firm has submitted to the FCA.

IPRU-INV 13.14.4R

Annual income must include the following amounts due to the firm in respect of its designated investment business:

  1. (1)

    brokerage;

  2. (2)

    fees;

  3. (3)

    commissions; and

  4. (4)

    other related income (for example, administration charges2 or profit shares).

IPRU-INV 13.14.5G

A firm should include in its annual income those amounts it may have agreed to pay to other persons involved in a transaction, such as other intermediaries or self-employed advisers.

IPRU-INV 13.14.6G

A firm should not include in its annual income those amounts due to it that are used in the calculation of its capital resources requirement under MIPRU 4.2.11R (Capital resources requirement: mediation activity only) or MIPRU 4.2.19R (Capital resources requirement: insurance mediation activity and home financing, or home finance administration).

IPRU-INV 13.14.7G

For the purpose of IPRU-INV 13.14.3R, a firm should ensure that the amount of annual income adequately reflects the level of its designated investment business when deciding whether to add any income not included under any of the reporting forms in IPRU-INV 13.4.3R(3). In doing so, the firm should have regard to its circumstances, for example, where such income is being accounted for by a third party.

IPRU-INV 13.14.8R

If a firm is a principal, its annual income includes amounts due to its appointed representative for activities related to designated investment business for which the firm has accepted responsibility.

IPRU-INV 13.14.9G

If a firm is a network, its annual income should include the relevant income due to all of its appointed representatives for designated investment business.