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 may be subject to the Prudential sourcebook for MiFID Investment Firms (MIFIDPRU) or the Interim Prudential sourcebook for Investment Businesses (IPRU(INV)), as appropriate.13 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).
This chapter does not apply to an authorised professional firm:
whose main business is the practice of its profession; and
whose regulated activities covered by this chapter are incidental to its main business.
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).
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.
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- (1) 8
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 regulated 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).
Social housing firms undertake small amounts of home finance1business even though their main business consists of activities other than regulated activities. Their home financing1is 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 FCA 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 4A permission is limited to home financing1and home finance administration1, their net tangible assets must be greater than zero.1 1 1 1 1 1
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.55