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WDPG App 9.1 Estimating the time necessary and costs for wind-down

WDPG App 9.1.1G

1Firms may take into account the following to estimate the time and costs needed for wind-down.

  1. (1)

    Firms should not take on new clients after a decision to wind down the firm’s regulated business is made, but there may be a continuing income stream from contracts with existing clients before the cancellation period is over. Firms may however want to consider how certain these remaining income streams will be in the context of winding down.

  2. (2)

    Firms then need to estimate the costs of winding down. These costs include redundancy payments, retainer premiums for essential employees, legal and other professional fees, or cancellation penalties with third party providers.

  3. (3)

    Firms may draw out these estimated revenue and costs on a month-by-month schedule covering the entire wind-down period.

  4. (4)

    The estimated wind-down costs may also take into account the possible need for an administrator and all other wind-down conditional costs such as tax, legal, specialist consultancy and audit.

  5. (5)

    Firms need to estimate, conservatively, the time necessary to wind down to the point that the FCA would cancel the firm’s Part 4A permission.

    Effective

    Less effective

    The firm sets out a month-by-month schedule of revenue and costs in the wind-down period. Costs are itemised and conservatively estimated.

    The firm estimates costs on a quarterly basis.

    [Note: Though this is not necessarily wrong, this would make it difficult to assess if the firm would have enough cash or liquid assets to meet its expenses on a monthly basis.]