Guidance: Purpose of this Rulebook

The purpose of this Rulebook, “PRU(INV)”, is to complement the regulatory framework established by the Financial Services Framework Regulations (“the Framework Regulations”). It sets out the requirements for PRU Investments Firms to hold Capital Resources and other financial resources sufficient to cover the risks arising from their business. If the Rules operate as intended, a PRU Investment Firm should have a sufficient buffer of assets in excess of its liabilities so that there is only a very remote chance that it will become insolvent and thereby cause a loss to its customers and the wider financial markets (although the Rules do not guarantee that this will never happen). The Rules will also provide a legal basis on which the AFSA may take action against a PRU Investment Firm which it considers does not have sufficient capital and other financial resources - for example by requiring it to stop transacting any new business, so as to minimise the losses to clients and/or potential market participants that might result from a failing PRU Investment Firm. Such action would also further the AFSA's objectives to avert any potential harm to wider market stability and manifestation of systemic risk.