• PRU 5.10 PRU 5.10 Securities Underwriting Capital Requirement

    • PRU 5.10.1 PRU 5.10.1

      This Section applies to an Authorised Person in Category 1, 2 or 5 in respect of Trading Book Securities Underwriting positions.

      • Guidance

        1. This Section sets out a framework for calculating the amount of Capital Requirement when an Authorised Person has commitments to underwrite an issue of Securities, and the associated risk management standards which an Authorised Person Underwriting Securities must meet.

    • PRU 5.10.2 PRU 5.10.2

      An Authorised Person must establish and maintain such systems and controls to monitor and manage its Underwriting and sub-Underwriting business as are appropriate to the nature, scale and complexity of its Underwriting and sub-Underwriting business.

      • Guidance

        1. An Authorised Person should take reasonable steps to:
        a. allocate responsibility for the management of its Underwriting and sub-Underwriting business;
        b. allocate adequate resources of the Authorised Person to monitor and control its Underwriting and sub-Underwriting business;
        c. satisfy itself that its systems to monitor its Exposure to a Counterparty will calculate, revise and update its Underwriting Exposure to each Counterparty and its Capital Requirements;
        d. satisfy itself of the suitability of each Person who performs functions for it in connection with the Authorised Person's Underwriting business, having regard to the Person's skill and experience; and
        e. satisfy itself that its procedures and controls to monitor and manage its Underwriting business address the capacity of sub-underwriters to meet sub-Underwriting commitments.

    • PRU 5.10.3

      (1) An Authorised Person must calculate a Securities Underwriting Capital Requirement if it has a commitment to underwrite or sub-underwrite an issue of Securities.
      (2) An Authorised Person has a commitment to underwrite or sub-underwrite an issue of Securities where:
      (a) it gives a commitment to an Issuer of Securities to underwrite an issue of Securities;
      (b) it gives a commitment to sub-underwrite an issue of Securities; or
      (c) it is a member of a syndicate or Group that gives a commitment to an Issuer to underwrite an issue of Securities or a commitment to sub-underwrite an issue of Securities.

    • PRU 5.10.4

      An Authorised Person must regard a commitment to underwrite an issue of Securities, subject to any right set out in Rule 5.10.6, as the initial commitment to underwrite from the earlier of:

      (a) the time the Authorised Person signs an agreement with the Issuer of Securities to underwrite those Securities; or
      (b) the time the price and allocation of the issue are set.

    • PRU 5.10.5

      Where the issue price has not been fixed, an Authorised Person must use the highest estimate of the price and its allocation for the purpose of calculating its initial gross commitment.

    • PRU 5.10.6

      If an Authorised Person has at its discretion an irrevocable right to withdraw from an Underwriting commitment, exercisable within a certain period, the commitment commences when that right expires.

    • PRU 5.10.7

      An Authorised Person must calculate its Securities Underwriting Risk Capital Requirement by:

      (a) applying its internally developed Market Risk model which has been approved by the Regulator for this purpose; or
      (b) applying the Rules in Section A5.8.