Related provisions for IPRU-INV 5.13.1

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

GENPRU 1.2.42BGRP
6A BIPRU firm with an IRB permission which has any material credit exposures excluded from its IRB models should also include these exposures in its stress and scenario testing to meet its obligations under the general stress and scenario testing rule. A BIPRU firm without an IRB permission,15 should conduct analyses to assess risks to the credit quality of its counterparties, including any protection sellers, considering both on and off-balance sheet exposures.
GENPRU 1.2.71GRP
In identifying scenarios, and assessing their impact, a firm should take into account, where material, how changes in circumstances might impact upon:(1) the nature, scale and mix of its future activities; and(2) the behaviour of counterparties, and of the firm itself, including the exercise of choices (for example, options embedded in financial instruments or contracts of insurance).
BIPRU 5.4.18RRP
The risk weight that would be assigned under the standardised approach to credit risk if the lending firm had a direct exposure to the collateral instrument must be assigned to those portions of exposure values4 collateralised by the market value of recognised collateral. For this purpose, the exposure value of an off-balance sheet item listed in BIPRU 3.7.2 R must be 100% of its value rather than the exposure value indicated in BIPRU 3.2.1 R.4 The risk weight of the collateralised
BIPRU 5.4.19RRP
A risk weight of 0% must be assigned to the collateralised portion of the exposure arising from transactions which fulfil the criteria enumerated in BIPRU 5.4.62 R5. If the counterparty to the transaction is not a core market participant a risk weight of 10% must be assigned.[Note:BCD Annex VIII Part 3 point 27]
BIPRU 13.4.16RRP
The single net amounts fixed by contracts for novation, rather than the gross amounts involved, may be weighted. For the purposes of the CCR mark to market method, a firm may obtain:(1) in BIPRU 13.4.2 R, the current replacement cost; and(2) in BIPRU 13.4.3 R, the notional principal amounts or underlying values;by taking account of the contract for novation.[Note: BCD Annex III Part 7 point c(i)]
COLL 5.8.7RRP
The following rules and guidance in COLL 5.1 (Introduction), COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.5 (Cash, borrowing, lending and other provisions) apply to the authorised fund manager of a UCITS scheme which is a feeder UCITS and to an ICVC which is a feeder UCITS:(1) COLL 5.1.1 R (Application), COLL 5.1.2G (1) (Purpose) and COLL 5.1.3 R (Treatment of obligations);(2) COLL 5.2.1 R (Application), COLL 5.2.2 R (Table of application) and
BIPRU 13.1.3GRP
The requirement to calculate the counterparty credit risk capital charge for trading book items is set out in BIPRU 14.
BIPRU 14.3.2GRP
The capital requirement for unsettled transactions is an element of the counterparty risk capital component set out in BIPRU 14.2.1 R.
IPRU-INV 5.4.12RRP
A firm's total capital requirement is the sum of its:(a) expenditure based requirement calculated in accordance with IPRU-INV 5.10;(b) position risk requirement calculated in accordance with IPRU-INV 5.11;(c) counterparty risk requirement calculated in accordance with IPRU-INV 5.12 to 5.15;(d) foreign exchange requirement calculated in accordance with IPRU-INV 5.16; and(e) other assets requirement calculated in accordance with IPRU-INV 5.17.
REC 5.2.14GRP

Information and supporting documentation (see REC 5.2.4 G).

(1)

Details of the applicant's constitution, structure and ownership, including its memorandum and articles of association (or similar or analogous documents ) and any agreements between the applicant, its owners or other persons relating to its constitution or governance (if not contained in the information listed in REC 5.2.3A G)1. An applicant for RAP status must provide details of the relationship between the governance arrangements in place for the UK RIE and the RAP.76

3

(2)

Details of all business to be conducted by the applicant, whether or not a regulated activity (if not contained in the information listed in REC 5.2.3A G)1.

(3)

Details of the facilities which the applicant plans to operate, including details of the trading platform or (for a RAP) auction platform,7 settlement arrangements, clearing facilitation services5 and custody services which it plans to supply. An applicant for RAP status must provide details on the relationship between the auction platform and any secondary market in emissions auction products which it operates or plans to operate.76

635443

(4)

Copies of the last three annual reports and accounts and, for the current financial year, quarterly management accounts.

(5)

Details of its business plan for the first three years of operation as a UK recognised body (if not contained in the information listed in REC 5.2.3A G)1.

(6)

A full organisation chart and a list of the posts to be held by key individuals (with details of the duties and responsibilities) and the names of the persons proposed for these appointments when these names are available (if not contained in the information listed in REC 5.2.3A G)1.

(7)

Details of its auditors, bankers, solicitors and any persons providing corporate finance advice or similar services (such as reporting accountants) to the applicant.

(8)

Details of any relevant functions to be outsourced or delegated, with copies of relevant agreements.

(9)

Details of information technology systems and of arrangements for their supply, management, maintenance and upgrading, and security.

(10)

Details of all plans to minimise disruption to operation of its facilities in the event of the failure of its information technology systems.

(11)

Details of internal systems for financial control, arrangements for risk management and insurance arrangements to cover operational and other risks.

(12)

Details of its arrangements for managing any counterparty risks.

5

(13)

Details of internal arrangements to safeguard confidential or privileged information and for handling conflicts of interest.

(14)

Details of arrangements for complying with the notification rules and other requirements to supply information to the FCA5.

5

(15)

Details of the arrangements to be made for monitoring and enforcing compliance with its rules and with its clearing, settlement and default arrangements.

(16)

A summary of the legal due diligence carried out in relation to ascertaining the enforceability of its rules (including default rules) and the results and conclusions reached.

5

(17)

Details of the procedures to be followed for declaring a member in default, and for taking action after that event to close out positions, protect the interests of other members and enforce its default rules.

(18)

Details of membership selection criteria, rules and procedures, including (for a RAP) details of how the rules of the UK RIE will change in order to reflect RAP status7.

63

(19)

Details of arrangements for recording transactions effected by, or cleared through, its facilities.

(20)

Details of arrangements for detecting financial crime and market abuse , including arrangements for complying with money laundering law.

(21)

Details of criteria, rules and arrangements for selecting specified investments to be admitted to trading on (or cleared by) an RIE and, where relevant, details of how information regarding specified investments will be disseminated to users of its facilities.

5

(22)

Details of arrangements for cooperating with the FCA5 and other appropriate authorities, including draft memoranda of understanding or letters.

5

(23)

Details of the procedures and arrangements for making and amending rules, including arrangements for consulting on rule changes.

(24)

Details of disciplinary and appeal procedures, and of the arrangements for investigating complaints.
GENPRU 2.1.51RRP
A BIPRU firm must calculate its credit risk capital requirement as the sum of:(1) the credit risk capital component; and15(2) the counterparty risk capital component.15(3) [deleted]15
BIPRU 11.5.4RRP
A firm must disclose the following information regarding compliance with BIPRU 3, BIPRU 4, 5, BIPRU 7, 5 and the overall Pillar 2 rule:(1) a summary of the firm's approach to assessing the adequacy of its internal capital to support current and future activities;(2) for a firm calculating risk weighted exposure amounts in accordance with the standardised approach to credit risk, 8% of the risk weighted exposure amounts for each of the standardised credit risk exposure classes;(3)
SUP 16.18.4UKRP

5Reporting to the FCA

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:

(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;

(b)

the markets of which it is a member or where it actively trades;

(c)

the diversification of the AIF's portfolio, including, but not limited to, its principal exposures and most important concentrations.

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.

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

(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;

(b)

any new arrangements for managing the liquidity of the AIF;

(c)

the risk management systems employed by the AIFM to manage the market risk, liquidity risk, counterparty risk and other risks including operational risk;

(d)

the current risk profile of the AIF, including:

(i)

the market risk profile of the investments of the AIF, including the expected return and volatility of the AIF in normal market conditions;

(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;

(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

(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.

3.

The information referred to in paragraphs 1 and 2 shall be reported as follows:

(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;

(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;

(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;

(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.

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.

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.

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.

7.

[deleted]5

[Note: Article 110 of the AIFMD level 2 regulation]
IFPRU 4.12.42GRP
Where a firm achieves significant risk transfer for a particular transaction, the FCA expects it to continue to monitor risks related to the transaction to which it may still be exposed. The firm should consider capital planning implications of securitised assets returning to its balance sheet. The UK CRR3 requires a firm to conduct regular stress testing of its securitisation activities and off-balance sheet exposures. The stress tests should consider the firm-wide impact of
IPRU-INV 5.12.1RRP

11

Receivables

In the case of receivables due to the firm in the form of fees, commission, interest, dividends and margin in exchange-traded futures or options contracts, which are directly related to items included in the trading book, the CRR is calculated as follows:

CRR = A x RF, where

A = the amount of the sum due; and

RF = the appropriate risk factor derived from IPRU-INV 5.14.1R.

Note 1

This requirement attaches only to balances arising from proprietary activity falling within the definition of the trading book.

Note 2

This requirement does not attach to items deducted in full as illiquid assets.

2

Delivery of cash against documents

Where a firm enters into a trading book transaction and the transaction is to be settled by delivery of cash against documents, the firm's CRR in respect of that transaction is calculated as follows:

CRR = (SP - MV) x RF, where

SP = agreed settlement price;

MV = current market value;

RF = the appropriate risk factor derived from IPRU-INV 5.13.1R.

The CRR should only be calculated where the difference between SP and MV would involve a loss if borne by the firm.

3

Free deliveries

Where a firm enters into a trading book transaction and the firm pays for the securities before it receives documents of title or delivers documents of title before receiving payment, the CRR in respect of that transaction is calculated as follows:

CRR =

V x RF,

where

V

(i)

the full amount due to the firm (i.e. the contract value) where the firm has delivered securities to a counterparty and has not received payment; or

(ii)

the market value of the securities, where the firm has made payment to a counterparty for securities and has not received documents of title; and

RF =

the appropriate risk factor derived from IPRU-INV 5.14.1R.

4

Settlement outstanding 30 days or more

In the case of trading book transactions entered into by a firm where the firm pays for the securities before it receives documents of title or delivers documents of title before receiving payment and settlement has not been effected within 30 days of falling due, CRR = V.

5

Repos/Stock Lending and Reverse Repos/Stock Borrowing

Where a firm enters into a transaction based on securities included in the trading book under the terms of a repurchase agreement or a securities lending agreement the firm's CRR in respect of that transaction is calculated as follows:

CRR = V x RF, where

RF = the appropriate risk factor derived from IPRU-INV 5.14.1R; and

for repos/stock lending:

V = the excess of the market value of the securities over the value of the collateral provided under the agreement, if the net figure is positive; or

for reverse repos/stock borrowing:

V = the excess of the amount paid or the collateral given for the securities received under the agreement, if the net figure is positive.

6

otc derivatives

In the case of a transaction entered into by a firm as principal in an otc derivative the CRR is calculated as follows:

CRR = A x RF, where

A = the appropriate credit equivalent amount derived from IPRU-INV 5.15.1R; and

RF = the appropriate risk factor derived from IPRU-INV 5.14.1R.

This calculation shall not apply to contracts for interest rate and foreign exchange which are traded on a recognised investment exchange or designated investment exchange where they are subject to a daily margin requirement and foreign exchange contracts with an original maturity of 14 calendar days or less.

A firm may net off contracts with the same counterparty in the same otc derivative contract for settlement on the same date in the same currency provided that the firm is legally entitled under the terms of the contracts with such a counterparty to net such contracts by novation.

BIPRU 7.7.7RRP
The general eligibility criteria for using the methods in BIPRU 7.7.4R and BIPRU 7.7.9R - BIPRU 7.7.11R, for CIUs issued by companies supervised or incorporated within the UK2 are that:(1) the CIU's prospectus or equivalent document must include:(a) the categories of assets the CIU is authorised to invest in;(b) if investment limits apply, the relative limits and the methodologies to calculate them;(c) if leverage is allowed, the maximum level of leverage; and(d) if investment
IFPRU 8.2.13RRP
A firm may only make use of the exemptions provided in this section where the following conditions are met:(1) the specific nature of the exposure, the counterparty or the relationship between the firm and the counterparty eliminate or reduce the risk of the exposure; and(2) any remaining concentration risk can be addressed by other equally effective means, such as the arrangements, processes and mechanisms in IFPRU 2.2.22R1 (Concentration risk).[Note: article 400(3) of the UK
COLL 5.3.3CRRP
2For the purposes of this section, exposure must be calculated taking into account the current value of the underlying assets, the counterparty risk, future market movements and the time available to liquidate the positions.[Note: article 51(3) second paragraph of the UCITS Directive]
BIPRU 13.7.6RRP
A firm may treat contractual netting as risk-reducing only under the following conditions:(1) the firm must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the firm would have a claim to receive or an obligation to pay only the net sum of the positive and
BIPRU 8.7.18GRP
The credit risk capital requirement (on which the consolidated credit risk requirement is based) is split into two3capital charges. One relates to credit risk in the non-trading book (the credit risk capital component). One relates to credit risk in the trading book (the counterparty risk capital component). 3131
IPRU-INV 5 App 1.1GRP

1The following words or terms throughout IPRU-INV 5 appearing in bold (other than headings and titles) are to have the meanings given to them below if not inconsistent with the subject or context. If a defined term is italicised the definition appearing in the main Handbook Glossary applies.

Term

Meaning

accounting reference date

means:

(a)

the date to which a firm's accounts are prepared in order to comply with the relevant Companies Act legislation. In the case of a firm not subject to Companies Act legislation, the equivalent date selected by the firm; and

(b)

in the case of an OPS firm which is not subject to the relevant Companies Act legislation, the date to which the accounts of the OPS in respect of which the firm acts are prepared.

annual expenditure

has the meaning given in IPRU-INV 5.5.1 (Determination).

category a body

means:

(a)

the government or central bank of a zone a country; or

(b)

EU or Euratom (the European Atomic Energy Community); or

(c)

the government or central bank of any other country, provided the receivable in question is denominated in that country's national currency.

category b body

means:

(a)

the European Investment Bank (EIB) or a multi-lateral development bank; or

(b)

the regional government or local authority of a zone a country; or

(c)

an investment firm or credit institution authorised in a zone a country; or

(d)

a recognised clearing house or exchange; or

(e)

an investment firm or credit institution authorised in any other country, which applies a financial supervision regime at least equivalent to the Capital Adequacy Directive.

counterparty

means any person with or for whom a firm carries on regulated business or an ancillary activity.

counterparty risk requirement

has the meaning given in IPRU-INV 5.11.1R (Counterparty risk requirement).

expenditure based requirement

means the requirement calculated in accordance with IPRU-INV 5.9.1R (Expenditure based requirement).

financial resources

has the meaning given in IPRU-INV 5.2.3R (Financial resources).

financial resources requirement

has the meaning given in IPRU-INV 5.4.1R (Determination of requirement).

financial resources rules

has the meaning given in IPRU-INV 5.2.

financial return

means quarterly financial return or monthly financial return as the case may be.

foreign exchange position

has the meaning given in IPRU-INV 5.14.1R (Foreign exchange requirement).

investment

means a designated investment in the main Glossary.

investment business

means designated investment business in the main Glossary.

investment firm

has the meaning given to investment firm in the main Glossary except that it excludes persons to which MiFID does not apply as a result of articles 2 or 3 of MiFID.

Note: An investment firm is not necessarily a firm for the purposes of the rules.

investment manager

means a person who, acting only on behalf of a customer, either:

(a)

manages an account or portfolio in the exercise of discretion; or

(b)

has accepted responsibility on a continuing basis for advising on the composition of the account or portfolio.

liquid capital

has the meaning given in IPRU-INV 5.3.1R (Calculation of own funds and liquid capital).

liquid capital requirement

has the meaning given in IPRU-INV 5.4.4R (Liquid capital requirement).

non-retail client

means a professional client or an eligible counterparty.

OPS or occupational pension scheme

means any scheme or arrangement which is comprised in one or more instruments or agreements and which has, or is capable of having, effect in relation to one or more descriptions or categories of employment so as to provide benefits, in the form of pensions or otherwise, payable on termination of service, or on death or retirement, to or respect of earners with qualifying service in an employment of any such description or category.

OPS firm

means:

(a)

a firm which:

(i)

carries on OPS activity but not with a view to profit; and

(ii)

is one or more of the following:

(A)

a trustee of the occupational pension scheme in question;

(B)

a company owned by the trustees of the occupational pension scheme in question;

(C)

a company which is:

(I)

an employer in relation to the occupational pension scheme in question in respect of its employees or former employees or their dependants; or

(II)

a company within the group which includes an employer within (I); or

(III)

an administering authority subject to the Local Government Superannuation Regulations 1986; or

(b)

a firm which:

(i)

has satisfied the requirements set out in (a) at any time during the past 12 months; but

(ii)

is no longer able to comply with those requirements because of a change in the control or ownership of the employer referred to in (a)(ii) during that period.

otc derivative

means interest rate and foreign exchange contracts covered by Annex III to the previous version of the Banking Consolidation Directive (i.e. Directive (2000/12/EC) and off balance sheet contracts based on equities which are not traded on a recognised or designated investment exchange or other exchange where they are subject to daily margin requirements, excluding any foreign exchange contract with an original maturity of 14 calendar days or less.

other assets requirement

has the meaning given in IPRU-INV 5.17.1R (Other assets requirement).

own funds

has the meaning given in IPRU-INV 5.3.1R and IPRU-INV 5.3.2R, as applicable.

own funds requirement

has the meaning given in IPRU-INV 5.4.3R and IPRU-INV 5.4.4R (Own funds requirement), as applicable.

permitted business

means regulated activity which a firm has permission to carry on.

position risk requirement

has the meaning given in IPRU-INV 5.11.1R (Position risk requirement).

prescribed subordinated loan agreement

means the subordinated loan agreement prescribed by the appropriate regulator for the purposes of IPRU-INV 5.6.4R.

qualifying capital instrument

means that part of a firm's capital which is a security of indeterminate duration, or other instrument, that fulfils the following conditions:

(a)

it may not be reimbursed on the bearer's initiative or without the prior agreement of the appropriate regulator;

(b)

the debt agreement must provide for the firm to have the option of deferring the payment of interest on the debt;

(c)

the lender's claims on the firm must be wholly subordinated to those of all non-subordinated creditors;

(d)

the documents governing the issue of the securities must provide for debt and unpaid interest to be such as to absorb losses, whilst leaving the firm in a position to continue trading; and

(e)

only fully paid-up amounts shall be taken into account.

qualifying capital item

means that part of a firm's capital which has the following characteristics:

(a)

it is freely available to the firm to cover normal banking or other risks where revenue or capital losses have not yet been identified;

(b)

its existence is disclosed in internal accounting records; and

(c)

its amount is determined by the management of the firm and verified by independent auditors, and is made known to, and is monitored by, the FCA.

2

qualifying property

has the meaning given in IPRU-INV 5.7.1R (Qualifying property and qualifying amount defined).

qualifying subordinated loan

has the meaning given in IPRU-INV 5.6 (Qualifying subordinated loans).

qualifying undertaking

has the meaning given in IPRU-INV 5.7.3R (Qualifying undertakings).

readily realisable investment

means a unit in a regulated collective investment scheme, a life policy or any marketable investment other than one which is traded on or under the rules of a recognised or designated investment exchange so irregularly or infrequently:

(a)

that it cannot be certain that a price for that investment will be quoted at all times; or

(b)

that it may be difficult to effect transactions at any price which may be quoted.

regulated business

means designated investment business in the main Glossary.

relevant foreign exchange items

means:

(a)

all assets less liabilities, including accrued interest, denominated in the currency (all investments at market or realisable value);

(b)

any currency future, at the nominal value of the contract;

(c)

any forward contract for the purchase or sale of the currency, at the contract value, including any future exchange of principal associated with currency swaps;

(d)

any foreign currency options at the net delta (or delta-based) equivalent of the total book of such options;

(e)

any non-currency option, at market value;

(f)

any irrevocable guarantee;

(g)

any other off-balance sheet commitment to purchase or sell an asset denominated in that currency.

reporting currency

means the currency in which the firm's books of account are maintained.

specified trustee business

1.

means any investment business carried on in the UK by a trustee firm, but excluding each of the following activities:

(a)

Dealing or arranging deals in investments

(i)

where the deal is transacted or arranged by a trustee firm with or through a PTP; or

(ii)

where the dealing or arranging is done in the course of, or is incidental to, an activity of management falling within paragraph (b) below; or

(iii)

where the trust is a unit trust scheme and the deal is or the arrangements are made with a view to either an issue or sale of units in such a scheme to, or a redemption or repurchase or conversion of such units or a dealing in investments for such a scheme carried out by with or through, the operator or on the instructions of the operator; or

(iv)

where the trustee firm, being a bare trustee (or, in Scotland, a nominee) holding investments for another person, is acting on that person's instructions; or

(v)

where any arrangements do not or would not bring about the transaction in question.

(b)

Managing investments

(i)

where the trustee firm has no general authority to effect transactions in investments at discretion; or

(ii)

if and to the extent that all day-to-day decisions in relation to the management of the investments or any discrete part of the investments are or are to be taken by a PTP; or

(iii)

if and to the extent that investment decisions in relation to the investments or any discrete part of the investments are or are to be taken substantially in accordance with the advice given by a PTP; or

(iv)

where the trustee firm is a personal representative or executor and is acting in that capacity; or

(v)

where the trust is a unit trust scheme and all day-to-day investment decisions in the carrying on of that activity are or are to be taken by the operator of the scheme.

(c)

Investment advice

(i)

where the relevant advice:

(A)

does not recommend the entry into any investment transaction or the exercise of any right conferred by any investment to acquire, dispose of, underwrite or convert such an investment; and

(ii)

if and to the extent that the relevant advice is in substance the advice of a PTP; or

(iii)

where the relevant advice is given by the trustee firm acting in the capacity of personal representative or executor.

(d)

Establishing, operating or winding up a collective investment scheme including acting as trustee of an authorised unit trust scheme but only to the extent that such activities do not otherwise constitute specified trustee business.

(e)

Any trustee activity undertaken as trustee of an issue of debentures or government or public securities:

(i)

where the issue is made by a company listed on a recognised investment exchange or on a designated investment exchange (or by a wholly-owned subsidiary of such a company); or

(ii)

where the issue is listed or traded either on a recognised investment exchange or on a designated investment exchange or on the Société de la Bourse de Luxembourg; or

(iii)

where the issue is made by a government, local authority or international organisation; or

(iv)

where the aggregate amounts issued (pursuant to the trust deed or any deed supplemental thereto and ignoring any amounts redeemed, repurchased or converted) exceed the sum of £10,000,000.

2.

For the purpose of this definition of "specified trustee business":

(a)

a transaction is entered into through a person if that person:

(i)

enters into it as agent; or

(ii)

arranges for it to be entered into as principal or agent by another person and the arrangements are such that they bring about the transaction in question;

(b)

investment transaction means a transaction to purchase, sell, subscribe for or underwrite a particular investment and "investment decision" means a decision relating to an investment transaction;

(c)

debentures means any securities falling within article 77 of the RAO;

(d)

government or public securities means any securities falling within article 78) of the RAO;

(e)

government, local authority or international organisation means:

(i)

the government of the United Kingdom, of Northern Ireland, or of any country or territory outside the United Kingdom;

(ii)

a local authority in the United Kingdom or Anywhere; or

(iii)

an international organisation the members of which include the United Kingdom2.

(f)

in determining the size of an issue of debentures or government or public securities made in a currency other than sterling, the amount of the issue shall be converted into sterling at the exchange rate prevailing in London on the date of issue.

total capital requirement

has the meaning given in IPRU-INV 5.4.5R (Total capital requirement).

trading book

in relation to a firm's business or exposures, means:

(a)

its proprietary positions in financial instruments:

(i)

which are held for resale and/or are taken on by the firm with the intention of benefiting in the short term from actual and/or expected differences between their buying and selling prices or from other price or interest-rate variations;

(ii)

arising from matched principal broking;

(iii)

taken in order to hedge other elements of the trading book;

(b)

exposures due to unsettled securities transactions, free deliveries, OTC derivative instruments, repurchase agreements and securities lending transactions based on securities included in (a)(i) to (iii) above, reverse repurchase agreements and securities borrowing transactions based on securities included in (a)(i) to (iii) above; and

(c)

fees, commission, interest and dividends, and margin on exchange-traded derivatives which are directly related to the items included in (a) and (b) above.

trustee activity

means, in relation to a firm, any activity undertaken in the course of or incidental to the exercise of any of its powers, or the performance of any of its duties, when

unit trust manager

means the manager of a unit trust scheme.

zone b country

means a country which is not a Zone A country in the Glossary.