Threshold conditions - Financial Conduct Authority

Thresholds condition 4: adequate resources

Threshold 4

Adequate Resources is a rule we have to ensure firms have adequate resources for the regulated activity they carry out or plan to carry out. Any firm that is regulated, or wishes to become regulated, should consider Threshold Conditions 4. You should review the level of resources required to operate your business effectively.

Which resources should I review?

Types of resources that your firm should review are:

  • financial;
  • the knowledge and competency of staff;
  • business assets – premises, technology and fixtures and fittings; and
  • the level and type of your insurance cover.

How should I review my firm’s resources?

This will vary between firms. There is no formal review process – it should be proportionate to the needs and circumstances of each firm and its clients. Every firm must decide what level of capital and Professional Indemnity Insurance (PII) it needs to meet both ongoing needs and unexpected eventualities.

What should I consider when reviewing my firm’s resources?

When reviewing your firm’s threshold conditions obligations, consider the following issues:

  • relying on an overdraft or loan facility to meet ongoing commitments is rarely sustainable; 
  • assets shown on your firm’s balance sheet need to be realisable; 
  • client money must be appropriately separated and accounted for by a firm; 
  • if your firm is part of a group, how recoverable are intercompany debts?; 
  • the number of staff and their level of competence, as well as appropriate cover in their absence; and 
  • whether key man or business interruption insurance is needed.