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:
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.
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:
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.