Part 3U.K.Trading income

Modifications etc. (not altering text)

Chapter 9U.K.Trade profits: other specific trades

[F1Banking companiesU.K.

Textual Amendments

F1Ss. 133A-133N and cross-heading inserted (with effect in accordance with s. 18(2) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 18(1)

133HInvestment bankU.K.

(1)This section gives the meaning of “investment bank” for the purposes of section 133E; and in this section “the relevant entity” has the same meaning as in subsections (2) to (6) of that section.

[F2(1A)At any time on or after 1 January 2022, the relevant entity is an investment bank if—

(a)it is an FCA investment firm that meets the conditions in subsection (1B), or

(b)it is designated by the Prudential Regulation Authority under Article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).

(1B)An FCA investment firm meets the conditions in this subsection if it has a permanent minimum capital requirement of £750,000 and is not—

(a)a limited activity firm,

(b)a limited licence firm,

(c)a local firm, or

(d)a matched principal trading firm.

(1C)In subsection (1B)—

  • “limited activity firm” means an investment firm that—

    (a)

    deals on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; or

    (b)

    meets all the following conditions—

    (i)

    it does not hold client money or securities;

    (ii)

    it undertakes only dealing on own account;

    (iii)

    it has no external customers; and

    (iv)

    its execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution;

  • “limited licence firm” means an investment firm that is not authorised to provide the investment services and activities of—

    (a)

    dealing on own account; or

    (b)

    underwriting of financial instruments or placing of financial instruments on a firm commitment basis;

  • “local firm” means a firm—

    (a)

    dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or

    (b)

    dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;

  • “matched principal trading firm” means an investment firm that executes investors’ orders for financial instruments and meets the following conditions—

    (a)

    the firm only holds financial instruments for its own account as a result of its failure to match investors’ orders precisely;

    (b)

    the total market value of all such positions is no more than 15% of the firm’s initial capital;

    (c)

    such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.

(1D)In determining, for the purposes of subsection (1B), whether an FCA investment firm has a permanent minimum capital requirement of £750,000, any transitional provision in the FCA Handbook is to be disregarded.

(1E)In subsections (1A) to (1D), the following terms have the meaning given by the FCA Handbook—

“dealing on own account”

“financial instrument”;

“initial capital”;

“investment firm”;

“market value”;

“permanent minimum capital requirement”.]

(2)At any time on or after 1 January 2014 [F3but before 1 January 2022], the relevant entity is an investment bank if—

(a)it is both an IFPRU 730k firm and a full scope IFPRU investment firm, or

(b)it is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).

(3)At any time on or after 1 January 2007 but before 1 January 2014, the relevant entity was an investment bank if it was both a BIPRU 730k firm and a full scope BIPRU investment firm.

(4)At any time before 1 January 2007, the relevant entity was an investment bank if it would have been both a BIPRU 730k firm and a full scope BIPRU investment firm if the Handbook of the Financial Services Authority in force on 1 January 2007 had been in force at that earlier time.

(5)In subsections (2) to (4)—

  • “IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question;

  • “BIPRU 730k firm” and “full scope BIPRU investment firm”—

    (a)

    in relation to any time on or after 1 April 2013 have the meaning given by the PRA Handbook at that time;

    (b)

    in relation to any time on or after 1 January 2007 but before 1 April 2013, have the meaning given by the Handbook of the Financial Services Authority at that time;

    (c)

    in relation to any time before 1 January 2007, have the meaning given by the Handbook of the Financial Services Authority as in force on 1 January 2007.

(6)If the relevant entity would at any time be an investment bank under subsection [F4(1A)(a),] (2)(a), (3) or (4) by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom, the relevant entity is to be treated for the purposes of section 133E as being an investment bank.

(7)In this section—

  • “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000;

  • [F5“FCA investment firm” has the meaning given by section 143A of FISMA 2000;]

  • “the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000.]

Textual Amendments