IPRU-INV 9.2 GENERAL REQUIREMENTS

IPRU-INV 9.2.1G

For an exempt CAD firm, the rules contained within this chapter replace the rules in respect of financial resources, financial resources requirements and nonfinancial resources related requirements contained within Chapter 3 or 5, as applicable. However, an exempt CAD firm must continue to comply with the requirements of Chapter 3 or 5, to the extent it is referred to Chapter 3 or 5 by a rule in this chapter.

IPRU-INV 9.2.2R

A firm must be able to meet its liabilities as they fall due.

IPRU-INV 9.2.3R

An exempt CAD firm that carries on any regulated activity other than MiFID business must also have and maintain at all times financial resources calculated in accordance with the chapter of IPRU(INV) to which the firm is otherwise subject (Chapters 3 or 5) at least equal to the requirements set out in the relevant chapter (except that if the only designated investment business an exempt CAD firm is carrying on in addition to investment services and activities is making arrangements with a view to transactions in investments (article 25(2) Regulated Activities Order) or agreeing to carry on that regulated activity or both, it only needs to comply with requirements set out in this chapter and not chapters 3 or 5).

Initial capital and professional indemnity insurance requirements - exempt CAD firms that are not IMD insurance intermediaries

IPRU-INV 9.2.4R
  1. (1)

    An exempt CAD firm which is not an IMD insurance intermediary must have:

    1. (a)

      initial capital of EUR 50,000; or

    2. (b)

      professional indemnity insurance covering the whole territory of the EEA or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 1,000,000 applying to each claim and in aggregate EUR 1,500,000 per year for all claims; or

    3. (c)

      a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to (a) or (b).

[Note: Article 67(3) of MiFID and article 31(1) of the CRD]

  1. (2)

    If a firm chooses to meet the requirements of either (b) or (c) above, it must nevertheless have initial capital of at least £5,000.

Initial capital and professional indemnity insurance requirements - exempt CAD firms that are also IMD insurance intermediaries

IPRU-INV 9.2.5R
  1. (1)

    An exempt CAD firm that is also an IMD insurance intermediary must comply with the professional indemnity insurance requirements at least equal to those set out in 9.2.4R(1)(b) (except that the minimum limits of indemnity are at least EUR 1,120,200 for a single claim and EUR 1,680,300 in aggregate) and in addition has to have:

    1. (a)

      initial capital of EUR 25,000; or

    2. (b)

      professional indemnity insurance covering the whole territory of the EEA or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 500,000 applying to each claim and in aggregate EUR 750,000 per year for all claims; or

    3. (c)

      a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to (a) or (b).

    [Note: Article 67(3) of MiFID and article 31(2) of the CRD]

  2. (2)

    If a firm chooses to meet the requirements of either (b) or (c) above, it must nevertheless have initial capital of at least £5,000.

IPRU-INV 9.2.5AG

Article 4(7) of the Insurance Mediation Directive requires the limits of indemnity to be reviewed every five years to take into account movements in European consumer prices. These limits will therefore be subject to further adjustments on the basis of index movements advised by the European Commission.

IPRU-INV 9.2.6G

A trade-off between initial capital and professional indemnity insurance is appropriate such that EUR 1 of initial capital is the equivalent of professional indemnity insurance cover of EUR 20 for a single claim against the firm and EUR 30 in aggregate.

Comparable guarantee

IPRU-INV 9.2.7R
  1. (a)

    If another authorised person which has net tangible assets of more than £10 million provides a comparable guarantee, an exempt CAD firm can treat it as an alternative to effecting or maintaining professional indemnity insurance pursuant to the rules relating to professional indemnity insurance above.

  2. (b)

    If the exempt CAD firm is a member of a group in which there is an authorised person with net tangible assets of more than £10 million, the comparable guarantee must be from that person.

  3. (c)

    A comparable guarantee means a written agreement on terms at least equal to those required by the initial capital and professional indemnity insurance requirements above to finance the claims that might arise as a result of the breach by the exempt CAD firm of its duties under the regulatory system or civil law.

Initial capital and ongoing capital requirements for local firms

IPRU-INV 9.2.8R

A local firm must:

  1. (a)

    have initial capital of EUR 50,000; and

[Note: Article 67(2) of MiFID and article 30 of the CRD]

  1. (b)

    maintain own funds calculated in accordance with the rules relating to own funds in 9.5, at least to the requirement for initial capital.

Ongoing capital requirements

IPRU-INV 9.2.9R
  1. (1)

    An exempt CAD firm must, at all times, maintain a combination of professional indemnity insurance and own funds, (own funds to be calculated in accordance with (2)), at least equal to the requirements in this chapter for professional indemnity insurance and initial capital.

  2. (2)
    1. (a)

      If the exempt CAD firm is an investment management firm its own funds must be calculated in accordance with the rules in IPRU-INV 5.2 to 5.71.

    2. (b)

      If the exempt CAD firm is a securities and futures firm its own funds must be calculated in accordance with the rules relating to own funds in 9.5.