Related provisions for INSPRU 3.1.59
Glossary of defined terms for Chapter 9
Note: If a defined term does not appear in the glossary below, the definition appearing in the HandbookGlossary applies.
approved exchange |
means an investment exchange listed as such in Appendix 33 to IPRU-INV 3. |
exchange |
means a recognised investment exchange or designated investment exchange. |
initial capital |
means the initial capital of a firm calculated in accordance with section 9.3. |
intangible assets |
the full balance sheet value of a firm's intangible assets including goodwill, capitalised development costs, licences, trademark and similar rights etc. |
intermediate broker |
in relation to a margined transaction, means any person through whom the firm undertakes that transaction. |
material current year losses |
means losses of an amount equal to 10% or more of initial capital minus B (with B calculated in accordance with Table 9.5.2R). |
material holding |
means a firm's holdings of shares and any other interest in the capital of a credit institution or financial institution: (a) which exceeds 10% of the capital of the issuer, and, where this is the case, any holdings of subordinated debt of the same issuer, the full amount is a material holding; or (b) holdings not deducted under (a) if the total amount of such holdings exceeds 10% of that firm'sown funds, in which case only the excess amount is a material holding. |
material insurance holdings |
(a) means the holdings of an exempt CAD firm of items of the type set out in (b) in any: (i) insurance undertaking; or (ii) insurance holding company that fulfils one of the following conditions: (iii) it is a subsidiary undertaking of that firm; or (iv) that firm holds a participation in it. (b) An item falls into this provision for the purpose of (a) if it is: (i) an ownership share; or (ii) subordinated debt or another item of capital that forms part of the tier two capital resources that1 falls into GENPRU 2 or, as the case may be, INSPRU 7, or is an item of “basic own funds” defined in the PRA Rulebook: Glossary. |
own funds |
means the own funds of a firm calculated in accordance with 9.2.9R(2) and The Interim Prudential Sourcebook for Investment Businesses Chapter 9: Financial resources requirements for an exempt CAD firm Page 2 of 2 Version: November 2007 9.2.8R(b). |
own funds requirement |
means the requirement set out in 9.2.9R(1) and 9.2.8R(b). |
verified |
means checked by an external auditor who has undertaken at least to: (a) satisfy himself that the figures forming the basis of the interim profits have been properly extracted from the underlying accounting records; (b) review the accounting policies used in calculating the interim profits so as to obtain comfort that they are consistent with those normally adopted by the firm in drawing up its annual financial statements and are in accordance with the relevant accounting principles; (c) perform analytical procedures on the result to date, including comparisons of actual performance to date with budget and with the results of prior period(s); (d) discuss with management the overall performance and financial position of the firm; (e) obtain adequate comfort that the implications of current and prospective litigation, all known claims and commitments, changes in business activities and provisioning for bad and doubtful debts have been properly taken into account in arriving at the interim profits; and (f) follow up problem areas of which he is already aware in the course of auditing the firm's financial statements. |
Table 2ZA: AIFMD activities |
Part II RAO Activities |
Part III RAO Investments |
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1. |
Article 51ZC |
N/A (activity relates to property of any kind) |
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2. |
Management of portfolios of investments, including those owned by pension funds and institutions for occupational retirement in accordance with article 19(1) of Directive 2003/41/EC, in accordance with mandates given by investors on a discretionary client-by-client basis (Note 2). |
Articles 14, 21, 25, 37, 40 (arranging only), 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
3. |
Investment advice (Note 2). |
Articles 53(1)10, 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
4. |
Safe-keeping and administration in relation to shares or units of collective investment undertakings. |
Articles 40, 45, 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
5. |
Reception and transmission or orders in relation to financial instruments. |
Articles 25(1), 64 |
Articles 76 to 81,82B,12 83 to 85, 89 |
Note 1. See FUND 1.4.2 R to FUND 1.4.4 R for further information in relation to the activities that full-scope UK AIFMs are able to perform. |
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Note 2. See FUND 1.4.5 G for the position with respect to assets which are not financial instruments. |
1Sections 87A(2), (2A), 2(3) and (4) of the Act provide for the general contents of a prospectus:
(2) |
The necessary information is the information necessary to enable investors to make an informed assessment of – |
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(a) |
the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the transferable securities and of any guarantor; and |
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(b) |
the rights attaching to the transferable securities.2 |
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2(2A) |
If, in the case of transferable securities to which section 87 applies, the prospectus states that the guarantor is a specified EEA State, the prospectus is not required to include other information about the guarantor. |
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(3) |
The necessary information must be presented in a form which is comprehensible and easy to analyse. |
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(4) |
The necessary information must be prepared having regard to the particular nature of the transferable securities and their issuer.6 266 |
1Liquid Capital Requirement = Initial Capital Requirement + Capital Surcharge Calculation of Initial Capital Requirement ICR = (√AUA) x K1 |
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Where |
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ICR |
means Initial Capital Requirement |
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AUA |
means Assets Under Administration calculated as the sum of the most recent annual valuations over the preceding 12 months of the personal pension schemes administered by the firm, and adjusted to include any revaluation of assets that may occur between the date of the most recent annual valuation and the date when the firm must calculate its AUA. A firm must calculate its AUA quarterly in line with the dates when it has to submit its regulatory capital reporting form in accordance with SUP 16.12 (Integrated Regulatory Reporting). Where it is not possible to value an asset (for example because there is no readily available market price), the most recent market valuation should be used. Where it would be reasonable to assume that the value of the asset has changed by more than 15% since the most recent market valuation, a firm should instead use a reasonable estimate. This is without prejudice to any requirement on a firm to provide a personal pension scheme member with accurate and timely valuations of their portfolios. |
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K1 |
is set subject to the firm’s AUA as specified in the below table: |
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AUA |
K1 constant to be applied |
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<£100m |
10 |
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£100-£200m |
15 |
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>£200m |
20 |
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When K1 changes due to an increase in AUA, in accordance with the thresholds in this table, the firm must apply the new K1 value within six months following the date on which its AUA exceeded the threshold of its previous K1 value. |
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Calculation of Capital Surcharge |
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CS =(√P) x K2 x ICR |
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Where |
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CS |
means Capital Surcharge |
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P |
means the fraction of personal pension schemes administered by the firm which contain one or more asset types which do not appear in the list of Standard Assets below, at the most recent quarter end. For example, if a quarter of personal pensions contained non-Standard Assets, this would be inputted in to the formula as 0.25. |
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K2 |
is set at 2.5. |
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ICR |
means the Initial Capital Requirement calculated as above. |
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Standard Assets The List of Standard Assets is as follows (subject to Note 1): Cash Cash funds Exchange traded commodities Government & local authority bonds and other fixed interest stocks Investment notes (structured products) Shares in Investment trusts Managed pension funds National Savings and Investment products Permanent interest bearing shares (PIBs) Physical gold bullion Real estate investment trusts (REITs) Securities2 admitted to trading on a regulated venue UK commercial property |
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NOTE 1: |
A Standard Asset must be capable of being accurately and fairly valued on an ongoing basis and readily realised within 30 days, whenever required. |
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NOTE 2: |
In addition to complying with the provisions of IPRU-INV 5.8, in accordance with IPRU-INV 5.3.2R, a firm must hold its liquid capital in financial resources as follows: |
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ICR |
realisable within 12 months; and |
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CS |
realisable within 30 days |