2.1.1 Governing Body’s responsibilities

(1) The Governing Body of a PRU Investment Firm, other than an Externally Regulated PRU Investment Firm, must consider whether the minimum Capital Resources and Liquid Assets required by these PRU(INV) Rules are adequate to ensure that there is no significant risk that the firm’s liabilities cannot be met as they fall due. The firm must obtain additional Capital Resources and Liquid Assets if its Governing Body considers that the minimum required does not adequately reflect the risks of its business.

(2) The Governing Body is also responsible for:

• (a) ensuring that the management of the firm’s Capital Resources and Liquid Assets is part of the firm’s overall risk management, and is aligned with the nature, scale and complexity of its business and its risk profile;
• (b) ensuring that the firm complies with these PRU(INV) Rules; and
• (c) monitoring the adequacy and appropriateness of the firm’s systems and controls and the firm’s compliance with them.

(3) The Governing Body of a PRU Investment Firm, including an Externally Regulated PRU

Investment Firm, shall identify any future circumstances and events that it considers to have a realistic probability of occurring and which would create a material risk that the PRU Investment Firm would become insolvent. For each set of circumstances and events, it shall assess how the financial position of the PRU Investment Firm would be affected, and what management actions it would expect to take in anticipation of, and as a result of, those circumstances and events in order to try to ensure that the PRU Investment Firm does not become insolvent and continues to comply with these PRU(INV) Rules.

(4) In addition, the Governing Body of a PRU Dealing Investment Firm, including an Externally Regulated PRU Investment Firm, shall conduct an annual internal capital adequacy assessment to examine how the PRU Dealing Investment Firm would be affected by adverse stresses and scenarios that might reasonably be expected to occur in a future period of three years and, in doing so, it shall take into account management actions that it would expect to take, and cashflows that it would expect to receive and pay, in anticipation of, and as a result of, those stresses and in those scenarios.

2.1.2 Systems and controls

(1) A PRU Investment Firm, other than an Externally Regulated PRU Investment Firm, must have adequate systems and controls to enable it to calculate and monitor its Capital Resources and Liquid Assets and its compliance with the requirements of these PRU(INV) Rules.

(2) The systems and controls must be in writing and must be appropriate for the nature, scale and complexity of the firm’s business and its risk profile.

(3) The systems and controls must enable the firm to demonstrate its compliance with these PRU(INV) Rules at all times.

(4) The systems and controls must enable the firm to manage its Capital Resources and Liquid Assets in anticipation of events or changes in market conditions.

(5) The firm must have contingency arrangements to maintain or increase its Capital Resources and Liquid Assets in times of stress.