MIFIDPRU 6.1 Application and purpose
1This chapter applies to:
- (1)
a MIFIDPRU investment firm; and
- (2)
a UK parent entity that is required by MIFIDPRU 2.5.11R to comply with MIFIDPRU 6 on the basis of its consolidated situation.
1Where this chapter applies on the basis of the consolidated situation of the UK parent entity, any reference to a “firm” or “MIFIDPRU investment firm” in this chapter is a reference to the hypothetical single MIFIDPRU investment firm created under the consolidated situation.
1MIFIDPRU 2.5.47R and MIFIDPRU 2.5.48G contain additional rules and guidance on how a UK parent entity should apply the requirements in this chapter on a consolidated basis. A UK parent entity may apply for an exemption from the application of this chapter on a consolidated basis under MIFIDPRU 2.5.19R.
Purpose and interpretation
1This chapter contains:
- (1)
a basic liquid assets requirement for MIFIDPRU investment firms (MIFIDPRU 6.2); and
- (2)
rules and guidance on which assets count as core liquid assets for the purposes of the basic liquid assets requirement (MIFIDPRU 6.3).
- (1)
1Where this chapter applies to a MIFIDPRU investment firm on a solo basis, the firm must comply with this chapter relying only on the core liquid assets it holds itself.
- (2)
However, the FCA recognises that there are circumstances in which it may be appropriate for a firm to rely on liquidity support provided by other entities within its group. Therefore, a firm that is subject to prudential consolidation may apply for an exemption from the application of this chapter on an individual basis under MIFIDPRU 2.3.2R(1).
1MIFIDPRU 7 contains requirements relating to a MIFIDPRU investment firm’s systems and controls for the identification, monitoring and management of material potential harms that arise out of liquidity risk.
1The basic liquid assets requirement in this chapter is based on a proportion of a firm's fixed overheads requirement and any guarantees provided to clients. A firm may need to hold more liquid assets to comply with its liquid assets threshold requirement under MIFIDPRU 7.