Fundamental Rules

1.1

Unless otherwise stated, this Part applies to all firms.

1.2

In this Part, the following definitions shall apply:

branch

has the meaning specified in Article 4(1)(17) of the CRR.

prudential context

means, in relation to activities carried on by a firm, the context in which the activities have, or might reasonably be regarded as likely to have, a negative effect on:

1. (1) the safety and soundness of firms; or
2. (2) the ability of the firm to meet either:
1. (a) the "fit and proper" test in threshold conditions 4E and 5E (Suitability); or
2. (b) the applicable requirements and standards under the regulatory system relating to the firm’s financial resources.

2.1

Fundamental Rule 1: A firm must conduct its business with integrity.

2.2

Fundamental Rule 2: A firm must conduct its business with due skill, care and diligence.

2.3

Fundamental Rule 3: A firm must act in a prudent manner.

2.4

Fundamental Rule 4: A firm must at all times maintain adequate financial resources.

2.5

Fundamental Rule 5: A firm must have effective risk strategies and risk management systems.

2.6

Fundamental Rule 6: A firm must organise and control its affairs responsibly and effectively.

2.7

Fundamental Rule 7: A firm must deal with its regulators in an open and cooperative way and must disclose to the PRA appropriately anything relating to the firm of which the PRA would reasonably expect notice.

2.8

Fundamental Rule 8: A firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services.

3.1

The Fundamental Rules apply to every firm, except that:

1. (1) for an incoming firm, the Fundamental Rules apply only in so far as responsibility for the matter in question is not reserved by an EU instrument to the firm's home state regulator;
2. (2) for an incoming EEA firm that is a credit institution without a top-up permission, Fundamental Rule 4 does not apply; and
3. (3) for an incoming EEA firm that has permission only for cross border services and does not carry on regulated activities in the UK, the Fundamental Rules do not apply.

3.2

A firm will not be subject to a Fundamental Rule to the extent that it would be contrary to the UK's obligations under EU legislation.

3.3

The Fundamental Rules apply with respect to the carrying on of:

1. (1) regulated activities;
2. (2) activities that constitute dealing in investments as principal, disregarding the exclusion in Article 15 of the Regulated Activities Order (Absence of holding out etc); and
3. (3) ancillary activities in relation to PRA-regulated activities.

3.4

Fundamental Rules 3, 4, 5, 6, 8 and (in so far as it relates to disclosing to the PRA) 7 (and this chapter) also:

1. (1) apply with respect to the carrying on of unregulated activities (for Fundamental Rules 5, 6 and 8 this is only in a prudential context); and
2. (2) take into account any activity of other members of a group of which the firm is a member.

3.5

The Fundamental Rules apply with respect to activities wherever they are carried on.

3.6

Where Fundamental Rule 7 refers to regulators, this means, in addition to the PRA, other regulators with recognised jurisdiction in relation to regulated activities, whether in the UK or abroad.

4.1

Each rule in the Principles for Businesses module of the PRA Handbook continues to apply in relation to any act or omission before the date on which this Part came into force.

4.2

Anything done, or having effect as done, under or for the purposes of any rule in the Principles for Businesses module of the PRA Handbook has effect after the date on which this Part came into force as if done under or for the purposes of any substantially similar rule in this Part.