Prudential categories and sub-categories

Part

SUP Supervision manual

Chapter

Prudential categories and sub-categories

Printed on: 15/05/2024

Rulebook at: 01/01/2007

SUP App 1

Prudential categories and sub-categories

SUP App 1.1

Application

01/12/2004

SUP App 1.1.1

This appendix applies to every firm.

21/06/2001

SUP App 1.2

Purpose

01/12/2004

SUP App 1.2.1

The purpose of this appendix is to give guidance on the prudential categories and sub-categories of firm used in the Interim Prudential sourcebooks and the Supervision manual. The prudential categories are defined in the Glossary, and some of the sub-categories are defined there and some in the glossaries of the Interim Prudential sourcebooks.

21/06/2001

SUP App 1.2.2

Prudential requirements for firms are set out in the Prudential Standards part of the Handbook according to their prudential category. Certain reporting requirements and other prudential material are contained in the Supervision manual, for example SUP 16 (Reporting requirements).

01/01/2007

SUP App 1.2.3

If there is any doubt about prudential categorisation, a firm should seek individual guidance from its usual supervisory contact at the FSA and an applicant for authorisation should seek guidance from the Corporate Authorisation department.

21/06/2001

SUP App 1.3

Prudential categories and sub-categories

01/12/2004

SUP App 1.3.1

Prudential categories and sub-categories used in the Prudential sourcebooks and the Supervision manual

Prudential categories (Note 1)

Applicable prudential requirements (Note 2)

Prudential sub-categories

Authorised professional firm*

IPRU(INV) 1 and 2

Bank*

GENPRU, BIPRU and IPRU(BANK)

EEA bank Overseas bank UK bank

BIPRU investment firm

GENPRU and BIPRU

Full scope BIPRU investment firm
BIPRU limited licence firm
BIPRU limited activity firm

Building society*

GENPRU, BIPRU and IPRU(BSOC)

Credit union

CRED 7, 8, 9, and 10

Version 1 credit union
Version 2 credit union

ELMI

ELM

Friendly society

IPRU(FSOC)

Directive friendly society
Incorporated friendly society
Non-directive friendly society
Registered friendly society
Flat rate benefits business friendly society

ICVC*

None, but see COLL and CIS

Incoming EEA firm

GENPRU, BIPRU, INSPRU and IPRU(BANK)

EEA bank

Incoming Treaty firm

None (unless another prudential category applies)

Insurer*

IPRU(INS) or IPRU(FSOC) and INSPRU

Long term insurer
General insurer
Friendly society (see above)

Investment management firm*

IPRU(INV) 1 and 5

OPS firm
Non-OPS life office
Non-OPS local authority
Individuals admitted to authorisation collectively
Individual whose sole investment business is giving investment advice to institutional or corporate investors
Other

Lead regulated firm

None (unless another prudential category applies)

Media firm*

None

Members' adviser

IPRU(INV) 1 and 4

Personal investment firm*

IPRU(INV) 1 and 13

Category A firm
Category A1 firm
Category A2 firm
Category A3 firm
Category B firm
Category B1 firm
Category B2 firm
Category B3 firm
Low resource firm
Network
Small personal investment firm

Securities and futures firm*

IPRU(INV) 1 and either 3 or 10
There is a special transitional regime for ex-section 43 lead regulated firms - see transitional rules to IPRU(INV).

IPRU(INV) 3:
Adviser
Arranger
Broad scope firm
Corporate finance advisory firm
Dematerialised instruction transmitter
Derivative fund manager
Energy market participant
Local
Oil market participant
Venture capital firm
Other
IPRU(INV) 10:
Category A
Category B
Category C
Category D
Category D - corporate finance advisory firm

Service company*

IPRU(INV) 1 and 6

Society of Lloyd's*

INSPRU and IPRU(INS)

UCITS firm*

UPRU

UCITS investment firm

GENPRU and BIPRU

UCITS qualifier

None (unless another prudential category applies)

UK ISPV

Underwriting agent

IPRU(INV) 1 and 4

Managing agent
Members' agent

Note 1 = It is possible for a firm to have more than one prudential category. But it cannot have more than one of the prudential categories marked with a '*'.
Note 2 = Only the requirements in the Prudential sourcebooks, and CRED are listed in the column. Requirements in other parts of the Handbook will also apply.

01/01/2007

SUP App 1.4

Relevance of prudential categories

01/12/2004

SUP App 1.4.1

Many, but not all, of the categories are used only in the the Prudential Standards part of the Handbook and the Supervision manual. The prudential category of a firm will normally determine:

(1) which module of the Prudential Standards part of the Handbook is applicable to the firm;

(2) if the firm is subject to the IPRU(INV), which chapter of that sourcebook is applicable to the firm;

(3) whether particular chapters of the Supervision manual are applicable to the firm; and

(4) if the firm is subject to SUP 3 (Auditors), SUP 16 (Reporting) or SUP 17 (Transaction reporting), which parts of those chapters apply to the firm.

01/01/2007

SUP App 1.4.2

In some cases, a firm may also fall within a prudential sub-category. This will determine which provisions within a particular sourcebook or chapter apply to the firm.

21/06/2001

SUP App 1.4.3

If a firm is part of a group, each authorised member of the group will have its own prudential category. Firms should refer to the provisions of the relevant module of the Prudential Standards part of the Handbook to determine whether and, if so, how consolidated supervision applies.

01/01/2007

SUP App 1.5

Determining the prudential categories of a firm

01/12/2004

SUP App 1.5.1

This appendix includes flow diagrams (Figures 1 and 2) to assist in determining the prudential category of a firm.

21/06/2001

SUP App 1.5.2

For a firm which became an authorised person after commencement, the FSA will have confirmed the applicable prudential category of the firm as part of the authorisation process.

21/06/2001

SUP App 1.5.3

For a firm with automatic authorisation by passporting under the Single Market Directives, exercising rights under the Treaty or as a UCITS qualifier, the FSA will have notified the firm of its prudential category at the same time as the FSA notified it of the applicable provisions to which it is subject (see SUP 13A for further details on inward passporting). If it has a top-up permission, then SUP App 1.5.2 G may also apply.

01/02/2006

SUP App 1.6

Changing prudential category after authorisation

01/12/2004

SUP App 1.6.1

A firm's prudential category may change in the following circumstances:

(1) A variation in the firm's permission may, in some cases, lead to an automatic change in the firm's prudential category or sub-category because of the way those categories are defined. For example, if an investment management firm is granted permission to accept deposits, it may become a bank and cease to be an investment management firm. Figures 1 and 2 may be used, even if a firm's permission is varied after commencement. They should enable a firm to determine whether any variation in its permission will lead to a change in prudential category.

(2) The FSA may vary the firm's permission and thereby require a firm to comply with the rules applicable to a different prudential category, either through using its own-initiative power or on the application of the firm.

21/06/2001

SUP App 1.6.2

A firm should notify the FSA immediately if it believes that its prudential category or sub-category has changed (see SUP 15.3.8 G (1)(g)), or if there has been an expansion or reduction in its business that could be relevant to its prudential categorisation or sub-categorisation (see SUP 15.3.8 G).

21/06/2001

SUP App 1.7

Prudential categories and sub-categories

01/12/2004

SUP Fig App 1.7.1

Figure 1: Determination of a firm's prudential category - general

21/06/2001

SUP Fig App 1.7.2

Figure 2: Determination of a firm's prudential category (cont'd)

21/06/2001

SUP App 1.8

Notes to Figures 1 and 2

01/12/2004

SUP App 1.8.1

Note 1

Chapter of IPRU(INV) that requirement on permission requires the firm to comply with

Firm's prudential category

Chapter 3

Securities and futures firm

Chapter 5

Investment management firm

Chapter 10

Securities and futures firm

Chapter 13

Personal investment firm

21/06/2001

SUP App 1.8.2

Note 2

The table below shows how a firm's main regulated activities determine its prudential category. A firm's 'main regulated activities' in this context are the regulated activities included in the firm's Part IV permission from which the firm derives or is expected to derive the most substantial part of its gross income, including commissions. The aggregate gross income from all of the activities listed against each prudential category should be considered to determine which source is the most substantial.

The gross income is based on the business plan submitted as part of the firm's application for a Part IV permission (for a firm given a Part IV permission after commencement) or on the firm's financial year preceding its authorisation under the Act (for a firm authorised under section 25 of the Financial Services Act 1986 prior to commencement).

If the firm's prudential categorisation is not clear, please consult the FSA for guidance.

Activities from which the most substantial part of the firm's gross income, including commissions, from regulated activitiesis derived

Firm's prudential category

(i) Managing investments other than for private customers or if the assets managed are primarily derivatives;
(ii) OPS activity;
(iii) acting as the manager or trustee of an AUT;
(iv) acting as the ACD or depository of an ICVC;
(v) establishing, operating or winding up a collective investment scheme other than an AUT or ICVC; and
(vi) safeguarding and administering investments.

Investment management firm

(i) Advising on investments, or arranging (bringing about) deals in investments, in relation to packaged products; and
(ii) managing investments for private customers.

Personal investment firm

(i) An activity carried on as a member of an exchange;
(ii) making a market in securities or derivatives;
(iii) corporate finance business;
(iv) dealing, or arranging (bringing about) deals in investments, in securities or derivatives;
(v) the provision of clearing services as a clearing firm;
(vi) managing investments where the assets managed are primarily derivatives; and
(vi) activities relating to spread bets;

Securities and futures firm

21/06/2001

SUP App 1.8.3

Note 3

Single SRO membership

Firm's prudential category

IMRO

Investment management firm

PIA

Personal investment firm

SFA

Securities and futures firm

21/06/2001

SUP App 1.8.4

Note 4

SRO to whose Financial Supervision requirements the firm was subject

Firm's prudential category

IMRO

Investment management firm

PIA

Personal investment firm

SFA

Securities and futures firm

21/06/2001

SUP App 1.8.5

Note 5
Only a small number of firms are expected to be authorised under section 25 of the Financial Services Act 1986 immediately prior to commencement and not be a member of one of the SROs. These firms are directly regulated by the FSA under the Financial Services Act 1986.

21/06/2001