INVESTMENT BUSINESS

Statement of Principles, Guidance Notes and Codes of Conduct

The Statement of Principles (“the Principles”) is made pursuant to section 9 of the Investment Business Act 2003 (the “Act”). The Principles are relevant to the Authority decision on whether to licence an investment provide and provides guidance on the Authority’s approach:

• in interpreting the minimum licensing criteria as defined in the Second Schedule of the Act, and the grounds for revocation specified in section 21;
• in exercising its power to grant, revoke or restrict a licence; and
• in exercising its powers to obtain information, reports and to require production of documents.

The Principles prescribes certain minimum levels of net assets which must be maintained on an on-going basis, having regard to the risks inherent in the business.

• When an investment provider carries on investment activities as principal, the minimum net asset level is $250,000;
• When an investment provider carries on investment activities as agent, the minimum net asset level is $100,000; and
• When the investment provider carries on investment activities other than as principal or agent, the minimum net assets level is $12,000.

However, the Principles also illustrate the circumstances in which the Authority may review the adequacy of the stipulated minimum level and substitute a higher minimum net asset threshold, including the possible application of a market-risk related capital add-on.

The Principles also defines those assets which the Authority accepts as liquid, and applies a standard requirement for liquid assets to be at least equivalent to the total of three months’ expenditure for investment providers that act as principal and/or agent.

If an investment provider acts as neither principal nor agent, than only one month’s expenditure must be maintained in the form of liquid assets

The Principles are of general application, and seek to take account of the wide diversity of investment providers that may be licensed under the Act. The Principles should be read in conjunction with the relevant the Code of Conduct (the “Code”), which is issued pursuant to section 10 of the Act.

The Code sets out specific standard for the conduct and practice of business by investment providers. The objectives of the Code are to ensure that an investment provider:

• ​Acts with high standards of integrity and fair dealing in the conduct of investment business;
• Acts with due skill, care and diligence in providing any services which it provides or indicates a willingness to provide.

The Act provides that every investment provider shall in the conduct of its business have regard to any Code of Conduct issued by the Authority. It further provides that a failure to comply with the provisions of such Code shall be taken into account by the Authority in determining whether an investment provider’s business is being conducted in a prudent manner as required by paragraph 5 of the minimum licensing criteria.​