IPRU-INV 14.2 SCOPE OF CONSOLIDATION
For the purposes of the rules in this chapter, a firm's group means the firm and:
- (1)
any EEA parent in the group which is a financial holding company, a credit institution, or an investment firm;
- (2)
any credit institution, investment firm or financial institution which is a subsidiary either of the firm or of the firm's EEA parent as defined in (1); and
- (3)
any credit institution, investment firm or financial institution in which the firm or one of the entities in (1) or (2) holds a participation.
If a group exists under rule 14.2.1, the firm must also include in the scope of consolidation any ancillary services undertaking and asset management company in the group.
Rule 14.1.1 states what type of firm may be subject to consolidated supervision (trigger firm). Rule 14.2.1 states what type of relationship triggers the existence of a group for consolidated supervision purposes. Rules 14.2.1 and 14.2.2 specify what entities should be included in the scope of consolidated supervision.
- (1)
A firm's parent is a financial holding company if it is either a financial institution or a securities and futures firm that is subject to the financial rules in Chapter 3 and that is a broad scope firm (but not a venture capital firm) and if its subsidiary undertakings carry out mainly listed activities, activities of a credit institution or activities undertaken by a Chapter 3 broad scope firm. For this purpose the FCA interprets the phrases 'mainly' or 'main business' to mean where the balance of business is over 40% of the relevant group or sub-group's balance sheet (measured on the basis of total assets) or profit and loss statement (measured on the basis of gross income). In addition, if the firm's parent has significant holdings in insurance undertakings or reinsurance undertakings, it is a mixed financial holding company, and the firm is subject to the rules in GENPRU 3.1 instead of the rules in this chapter. This is because a parent cannot be a financial holding company and a mixed financial holding company at the same time. GENPRU 3.1 sets out what constitutes significant insurance holdings (broadly more than 10% of the financial sector activities of the group). A firm's parent is a financial holding company and not regarded as a mixed financial holding company unless:
- (a)
the parent has been notified by its coordinator that the group it heads is a financial conglomerate (in accordance with Article 4(2) of the Financial Groups Directive); and
- (b)
it has not been notified that the coordinator and the relevant competent authorities have agreed not to treat the group as a financial conglomerate in accordance with
Article 3(3) of the Financial Groups Directive.
- (a)
- (2)
A firm with an ultimate non-EEA parent may also be subject to the provisions in GENPRU 3.2.
- (3)
In the case where undertakings are linked to the domain of consolidation by a relationship within the meaning of article 12(1) of Directive (83/349/EEC), the FCA will determine how consolidation is to be carried out.
Exclusions
A firm may, having first notified the FCA in writing, exclude from its group the following:
- (1)
any entity the total assets of which are less than the smaller of the following two amounts:
- (a)
10 million euros; or
- (b)
1% of the total assets of the group's parent or the undertaking that holds the participation;
provided that the total assets of such entities do not collectively breach these limits.
- (a)
- (2)
any entity the inclusion of which within the group would be misleading or inappropriate for the purposes of consolidated supervision.
- (1)
The FCA may require a firm to provide information about the position in the group of any undertaking excluded from the consolidation under rule 14.2.5.
- (2)
An exclusion under rule 14.2.5(2) would normally be appropriate when an entity would be excluded from the scope of consolidation under the relevant UK generally accepted accounting principles.