SUP App 1

Prudential categories and sub-categories

SUP App 1.1

Application

SUP App 1.1.1

See Notes

handbook-guidance
This appendix applies to every firm.

SUP App 1.2

Purpose

SUP App 1.2.1

See Notes

handbook-guidance
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.

SUP App 1.2.2

See Notes

handbook-guidance
The FSA is developing its approach to prudential standards and some provisions in the Supervision manual in a two-stage approach. Initially the FSA is including in the Handbook interim material as set out in the five Interim Prudential sourcebooks and the Supervision manual, for example SUP 16 (Reporting requirements). The FSA is developing material which will provide an integrated approach to the setting of prudential standards. Each of the Interim Prudential sourcebooks is based on the prudential regime that existed before commencement, changed, mainly where the Act, and other statutory and international developments, have made a change desirable or essential. The Lloyd's sourcebook shows less continuity with the prudential regime previously applied to the Society of Lloyd's, as it introduces requirements similar to those already applied to insurers. Most grandfathered firms have a prudential category and sub-category equivalent to that which they had before commencement.

SUP App 1.2.3

See Notes

handbook-guidance
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.

SUP App 1.3

Prudential categories and sub-categories

SUP App 1.4

Relevance of prudential categories

SUP App 1.4.1

See Notes

handbook-guidance
Many, but not all, of the categories are used only in the Interim Prudential sourcebooks and the Supervision manual. The prudential category of a firm will normally determine:
(1) which Interim Prudential sourcebook 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.

SUP App 1.4.2

See Notes

handbook-guidance
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.

SUP App 1.4.3

See Notes

handbook-guidance
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 Interim Prudential sourcebooks to determine whether and, if so, how consolidated supervision applies.

SUP App 1.5

Determining the prudential categories of a firm

SUP App 1.5.1

See Notes

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

SUP App 1.5.2

See Notes

handbook-guidance
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.

SUP App 1.5.3

See Notes

handbook-guidance
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.

SUP App 1.6

Changing prudential category after authorisation

SUP App 1.6.1

See Notes

handbook-guidance
A firm's prudential category may change in the following circumstances:
(1) A variation in the firm'spermission 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'spermission 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'spermission 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.

SUP App 1.6.2

See Notes

handbook-guidance
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).

SUP App 1.7

Prudential categories and sub-categories

SUP Fig App 1.7.1

See Notes

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

SUP Fig App 1.7.2

See Notes

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

SUP App 1.8

Notes to Figures 1 and 2

SUP App 1.8.1

See Notes

handbook-guidance

Note 1

SUP App 1.8.2

See Notes

handbook-guidance

Note 2

SUP App 1.8.3

See Notes

handbook-guidance

Note 3

SUP App 1.8.4

See Notes

handbook-guidance

Note 4

SUP App 1.8.5

See Notes

handbook-guidance
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.