SIFA 8.2 Financial Resources

Your firm must have and maintain at all times financial resources of the kinds and amounts specified by the rules in Chapter 13 of IPRU(INV). Your firm must also be able to meet its liabilities as they fall due.

In particular, your firm must have financial resources of at least £10,000 at all times (IPRU(INV) 13.10.1R). The method of calculating your firm's financial resources is set out in the following sections of IPRU(INV): 13.10.2R, 13.10.2AR, 13.10.3R and Table 13.10(2). We have included some worked examples of own funds calculations in Appendix B of the Guide.

Where personal investment firms also do mortgage or general insurance business, under PRU 9.3.24 R they should work out which is the higher financial resource requirement under the relevant parts or PRU and IPRU(INV). In the case of a low resource firm with a £10,000 financial resources requirement, the requirement is the higher of £10,000 and 2.5% of annual income from mortgage and general insurance activities (PRU 9.3.30R (1)). This means that a £10,000 requirement will apply unless a firm earns more than £400,000 in annual income from mortgage and general insurance activities. Annual income includes all brokerages, fees and commission earned by the firm for mortgage and general insurance business.

Where a low resource firm holds client money for general insurance mediation purposes with the money in a statutory trust account the resources requirement is 5% of annual income from its mortgage and general insurance activities (PRU 9.3.30R (2)). Firms that hold client money in a non-statutory trust account must maintain minimum capital of £50,000 or 5% of annual income which ever is the greater (CASS 5.4.4 R (4)).