Related provisions for COLL 5.2.23A
Assets and Off-Balance Sheet Items |
Risk Factor |
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Assets |
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Cash at bank and in hand and equivalent items |
NIL |
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Assets secured by acceptable collateral including deposits and certificates of deposit with lending institutions |
NIL |
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Amount due from trustees of authorised unit trusts or depositaries of authorised contractual schemes |
NIL |
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Note 1 |
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This only applies to firms who are authorised unit trust managers in relation to authorised unit trusts or authorised contractual scheme managers in relation to authorised contractual schemes they manage. |
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Amount due from depositaries of ICVCs |
NIL |
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Note 2 |
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This only applies to firms who are authorised corporate directors in relation to ICVCs they operate |
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Other receivables due from or explicitly guaranteed by or deposits with category a bodies |
NIL |
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Other receivables due from or explicitly guaranteed by or deposits with category b bodies |
1.6% |
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Pre-payments and accrued income (see paragraph 10 of IPRU-INV 5.8.2R) |
8% |
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NIL |
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Deferred acquisition cost asset |
NIL |
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All other assets |
8% |
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OFF-BALANCE SHEET ITEMS |
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Full Risk Items e.g. |
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Charges granted against assets |
8% x counterparty weight (see IPRU-INV 5.14.1R) |
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Guarantees given |
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Medium Risk Items e.g. |
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Undrawn credit facilities granted by the firm with an original maturity of more than one year |
4% x counterparty weight (see IPRU-INV 5.14.1R) |
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Low Risk Items e.g. |
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Undrawn credit facilities granted by the firm with an original maturity of one year or less |
NIL |
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Note |
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(1) |
In determining the appropriate other assets requirement (OAR) for guarantees given in a group context, a firm should follow the calculation below: |
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(a) |
Categorise the guarantee agreements into: |
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(i) |
those with the character of credit substitutes; or |
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(ii) |
those not having the character of credit substitutes; or |
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(iii) |
agreements to provide guarantees. |
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(b) |
Calculate the weighted value. |
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(i) |
For guarantees falling under (1)(a)(i), the weighted value will be 100% of the estimated current year liability under the guarantee. |
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(ii) |
For guarantees falling under (1)(a)(ii) the weighted value will be 50% of the estimated current year liability under the guarantee. |
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(iii) |
For guarantees falling under (1)(a)(iii), the weighted value will be nil. |
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(c) |
The OAR is calculated as: |
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Weighted value x 8% x counterparty weighting (IPRU-INV 5.14.1R) |
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(2) |
For the purpose of this requirement, in assessing whether the guarantee has the characteristics of a credit substitute the following factors should be considered: |
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(a) |
do the agreements allow for periodic or ad-hoc calling of funds; |
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(b) |
have the guarantees been drawn upon on a regular basis; |
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(c) |
do firms in the group rely on such guarantees to meet their working capital or regulatory capital requirements? |
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(3) |
Where a firm is part of a group including other FCA regulated entities which together have entered into cross-group guarantee arrangements which give rise to an OAR, the estimate of the potential liability under the guarantee may be apportioned between the regulated entities for the purpose of calculating each firm's OAR. |
5Reporting to the FCA |
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1. |
In order to comply with the requirements of [FUND 3.4.2R] and directions given by the FCA under regulation 21(2) of the AIFM Regulations 20135, an AIFM shall provide the following information when reporting to the FCA5: |
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(a) |
the main instruments in which it is trading, including a break-down of financial instruments and other assets, including the AIF's investment strategies and their geographical and sectoral investment focus; |
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(b) |
the markets of which it is a member or where it actively trades; |
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(c) |
the diversification of the AIF's portfolio, including, but not limited to, its principal exposures and most important concentrations. |
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The information shall be provided as soon as possible and not later than one month after the end of the period referred to in paragraph 3. Where the AIF is a fund of funds this period may be extended by the AIFM by 15 days. |
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2. |
For each of the EU AIFs they manage and for each of the AIFs they market in the United Kingdom or the5 Union, AIFMs shall provide to the FCA the following information in accordance with [FUND 3.4.3R]:5 |
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(a) |
the percentage of the AIF's assets which are subject to special arrangements as defined in Article 1(5) of this Regulation arising from their illiquid nature as referred to in [FUND 3.2.5R(1)]5; |
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(b) |
any new arrangements for managing the liquidity of the AIF; |
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(c) |
the risk management systems employed by the AIFM to manage the market risk, liquidity risk, counterparty risk and other risks including operational risk; |
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(d) |
the current risk profile of the AIF, including: |
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(i) |
the market risk profile of the investments of the AIF, including the expected return and volatility of the AIF in normal market conditions; |
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(ii) |
the liquidity profile of the investments of the AIF, including the liquidity profile of the AIF's assets, the profile of redemption terms and the terms of financing provided by counterparties to the AIF; |
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(e) |
information on the main categories of assets in which the AIF invested including the corresponding short market value and long market value, the turnover and performance during the reporting period; and |
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(f) |
the results of periodic stress tests, under normal and exceptional circumstances, performed in accordance with [FUND 3.6.3R(2) and 3.7.5R(2)(b)]5. |
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3. |
The information referred to in paragraphs 1 and 2 shall be reported as follows: |
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(a) |
on a half-yearly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed the threshold of either EUR 100 million or EUR 500 million laid down in sub-paragraphs (b) and (a) respectively of regulation 9(1) of the AIFM Regulations 20135 but do not exceed EUR 1 billion, for each of the UK and EU AIFs they manage and for each of the AIFs they market in the United Kingdom or5 the Union; |
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(b) |
on a quarterly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed EUR 1 billion, for each of the UK and5 EU AIFs they manage, and for each of the AIFs they market in the United Kingdom or5 in the Union; |
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(c) |
on a quarterly basis by AIFMs which are subject to the requirements referred to in point (a) of this paragraph, for each AIF whose assets under management, including any assets acquired through use of leverage, in total exceed EUR 500 million, in respect of that AIF; |
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(d) |
on an annual basis by AIFMs in respect of each unleveraged AIF under their management which, in accordance with its core investment policy, invests in non-listed companies and issuers in order to acquire control. |
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4. |
By way of derogation from paragraph 3, the FCA5 may deem it appropriate and necessary for the exercise of its function to require all or part of the information to be reported on a more frequent basis. |
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5. |
AIFMs managing one or more AIFs which they have assessed to be employing leverage on a substantial basis in accordance with Article 111 of this Regulation shall provide the information required under [FUND 3.4.5R5] at the same time as that required under paragraph 2 of this Article. |
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6. |
AIFMs shall provide the information specified under paragraphs 1, 2 and 5 in accordance with the pro-forma reporting template set out in the Annex IV. |
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7. |
[deleted]5 |
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[Note: Article 110 of the AIFMD level 2 regulation] |
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. |