PIB 5.10 PIB 5.10 Securities Underwriting Capital Requirement
PIB 5.10.1 PIB 5.10.1
This section applies to an
Authorised Firmin Category1, 2 or 5 in respect of Trading Book Securities Underwritingpositions.
PIB 5.10.1 Guidance1. This section sets out a framework for calculating the amount of
Capital Requirementwhen an Authorised Firmhas commitments to underwrite an issue of Securities, and the associated risk management standards which an Authorised Firm Underwriting Securitiesmust meet.2. Underwritingis defined in the Glossary as an arrangement under which a party agrees to buy, before issue, a specified quantity of Securitiesin an issue of Securitieson a given date and at a given price, if no other party has purchased or acquired them.
PIB 5.10.2 PIB 5.10.2
Authorised Firmmust establish and maintain such systems and controls to monitor and manage its Underwritingand sub-underwriting business as are appropriate to the nature, scale and complexity of its Underwritingand sub-underwriting business.
PIB 5.10.2 Guidance1. An
Authorised Firmshould take reasonable steps to:a. allocate responsibility for the management of its Underwritingand sub-underwriting business;b. allocate adequate resources of the Authorised Firmto monitor and control its Underwritingand sub-underwriting business;c. satisfy itself that its systems to monitor its Exposureto a Counterpartywill calculate, revise and update its Underwriting Exposureto each Counterpartyand its Capital Requirements;d. satisfy itself of the suitability of each person who performs functions for it in connection with the Authorised Firm's Underwritingbusiness, having regard to the person's skill and experience; ande. satisfy itself that its procedures and controls to monitor and manage its Underwritingbusiness address the capacity of sub-underwriters to meet sub-underwriting commitments.
PIB 5.10.3(1) An
Authorised Firmmust calculate a Securities Underwriting Capital Requirementif it has a commitment to underwrite or sub-underwrite an issue of Securities.(2) An Authorised Firmhas a commitment to underwrite or sub-underwrite an issue of Securitieswhere:(a) it gives a commitment to an Issuerof Securitiesto 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 Groupthat gives a commitment to an Issuerto underwrite an issue of Securitiesor a commitment to sub-underwrite an issue of Securities.
Authorised Firmmust regard a commitment to underwrite an issue of Securities, subject to any right set out in PIB Rule 5.10.6, as the initial commitment to underwrite from the earlier of:(a) the time the Authorised Firmsigns an agreement with the Issuerof Securitiesto underwrite those Securities; or(b) the time the price and allocation of the issue are set.
Where the issue price has not been fixed, an
Authorised Firmmust use the highest estimate of the price and its allocation for the purpose of calculating its initial gross commitment.
Authorised Firmhas at its discretion an irrevocable right to withdraw from an Underwritingcommitment, exercisable within a certain period, the commitment commences when that right expires.
Authorised Firmmust calculate its Securities Underwriting Risk Capital Requirementby:(a) applying its internally developed Market Riskmodel which has been approved by the DFSAfor this purpose; or(b) applying the Rules in PIB section A5.8.