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MIPRU 4.1 Application and purpose



2This chapter applies to a firm with Part IV permission to carry on any of the following activities, unless an exemption in this section applies:

  1. (1)

    insurance mediation activity;

  2. (2)

    home finance mediation activity;1

  3. (3)

    home financing1;

  4. (4)

    home finance administration1.


As this chapter applies only to a firm with Part IV permission, it does not apply to an incoming EEA firm (unless it has a top-up permission). An incoming EEA firm includes a firm which is passporting into the United Kingdom under the Insurance Mediation Directive3.


The definition of insurance mediation activity refers to several activities 'in relation to a contract of insurance' which includes a contract of reinsurance. This chapter, therefore, applies to a reinsurance intermediary in the same way as it applies to any other insurance intermediary.

Application: banks, building societies, insurers and friendly societies


This chapter does not apply to:

  1. (1)

    a bank; or

  2. (2)

    a building society; or

  3. (3)

    a solo consolidated subsidiary of a bank or a building society ; or

  4. (4)

    an insurer; or

  5. (5)

    a friendly society.


The capital resources of the firms above are calculated in accordance with the appropriate prudential sourcebook.

Application: firms carrying on designated investment business only


This chapter does not apply to a firm whose Part IV permission is limited to regulated activities which are designated investment business.

MIPRU 4.1.7G

A firm which carries on designated investment business, and no other regulated activity, may disregard this chapter. For example, a firm with permission limited to dealing in investments as agent in relation to securities is only carrying on designated investment business and the Interim Prudential sourcebook for investment businesses or the Prudential sourcebook for Banks, Building Societies and Investment Firms, as appropriate, will apply. However, if its permission is varied to enable it to arrange motor insurance as well, this activity is not designated investment business so the firm will be subject to the higher of the requirements in this chapter and those sourcebooks (see MIPRU 4.2.5 R).

Application: credit unions

MIPRU 4.1.8R

This chapter does not apply to:

  1. (1)

    a 'small credit union', that is one with:

    1. (a)

      assets of £5 million or less; and

    2. (b)

      a total number of members of 5,000 or less (see CRED 8.3.14 R); or

  2. (2)

    a credit union whose Part IV permission includes mortgage lending or mortgage administration (or both) but not insurance mediation activity or mortgage mediation activity.

MIPRU 4.1.9G
  1. (1)

    For credit unions to which this chapter applies and which are not CTF providers, the capital requirements will be the higher of the requirements in this chapter and in the Credit Unions sourcebook (see MIPRU 4.2.6 R).

  2. (2)

    For credit unions to which this chapter applies and which are CTF providers with permission to carry on designated investment business, the capital requirements will be the highest of the requirements in this chapter, those in the Credit Unions sourcebook and in the Interim Prudential sourcebook for investment businesses (see MIPRU 4.2.6 R).

  3. (3)

    1A credit union cannot carry on home purchase activities or reversion activities because the Credit Unions Act 1979 restricts the circumstances whereby credit unions can hold land.

Application: professional firms

  1. (1)

    This chapter does not apply to an authorised professional firm:

    1. (a)

      whose main business is the practice of its profession; and

    2. (b)

      whose regulated activities covered by this chapter are incidental to its main business.

  2. (2)

    A firm's main business is the practice of its profession if the proportion of income it derives from professional fees is, during its annual accounting period, at least 50% of the firm's total income (a temporary variation of not more than 5% may be disregarded for this purpose).

  3. (3)

    Professional fees are fees, commissions and other receipts receivable in respect of legal, accountancy, actuarial, conveyancing and surveying services provided to clients but excluding any items receivable in respect of regulated activities.

Application: Lloyd's managing agents

MIPRU 4.1.11R

This chapter does not apply to a managing agent.

MIPRU 4.1.12G

The reason for excluding managing agents from the provisions of this chapter is twofold: first, a member will have accepted full responsibility for those activities under the Society's managing agent agreement. Secondly, the member is itself subject to capital requirements which are equivalent to those applying to an insurer (to which this chapter is also disapplied).

Application: social housing firms


There are special provisions for a social housing firm when it is carrying on home financing 1or home finance administration 1(see MIPRU 4.2.7 R).




This chapter amplifies threshold condition 4 (Adequate resources) by providing that a firm must meet, on a continuing basis, a basic solvency requirement and a minimum capital resources requirement. This chapter also amplifies Principle 4 which requires a firm to maintain adequate financial resources by setting out capital requirements for a firm according to the regulated activity or activities it carries on.


Capital has an important role to play in protecting consumers and complements the roles played by professional indemnity insurance and client money protection (see the client money rules). Capital provides a form of protection for situations not covered by a firm's professional indemnity insurance and it provides the funds for the firm's PII excess, which it has to pay out of its own finances (see MIPRU 3.2.11 R and MIPRU 3.2.12 R for the relationship between the firm's capital and its excess).


More generally, having adequate capital gives the firm a degree of resilience and some indication to consumers of creditworthiness, substance and the commitment of its owners. It reduces the possibility of a shortfall of funds and provides a cushion against disruption if the firm ceases to trade.


There is a greater risk to consumers, and a greater adverse impact on market confidence, if a firm holding client money or other client assets fails. For this reason, the capital resources rules in this chapter clearly distinguish between firms holding client assets and those that do not.

Purpose: social housing firms


Social housing firms undertake small amounts of home finance1business even though their main business consists of activities other than regulated activities. Their home financing 1is only done as an adjunct to their primary purpose (usually the provision of housing) and is substantially different in character to that done by commercial lenders. Furthermore, they are subsidiaries of local authorities or registered social landlords which are already subject to separate regulation. The FSA does not consider that it would be proportionate to the risks involved with such business to impose significant capital requirements for these firms. The capital resources requirement for social housing firms therefore simply provides that, where their Part IV permission is limited to home financing 1and home finance administration1, their net tangible assets must be greater than zero.


A registered social landlord is a non-profit organisation which provides and manages homes for rent and sale for people who might not otherwise be able to rent or buy on the open market. It can be a housing association, a housing society or a non-profit making housing company. The Homes and Communities Agency and the Tenant Services Authority were set up by Parliament in 2008 and cooperate in providing financial assistance for social housing.5