Section 2: Management standards applicable to investment services providers and prudential provisions applicable to investment firms

The Autorité de contrôle prudentiel et de résolution may impose on a Class 2 investment firm an additional capital requirement in excess of the minimum amount provided for by the applicable regulations and require the application to its assets of a specific provisioning policy or a specific treatment with regard to capital requirements.

The Authority shall impose the additional capital requirement provided for in the previous paragraph in the following cases:

1° The investment firm is exposed to risks or risk elements, or imposes on others risks that are significant and that are not covered or not sufficiently covered by the capital requirements, in particular the requirements based on the K factors set out in Part 3 or Part 4 of Regulation (EU) 2019/2033;

2° The investment firm does not meet the requirements provided for in Articles L. 533-2-2 and L. 533-29 and it is unlikely that other measures will sufficiently improve the arrangements, processes, mechanisms and strategies within an appropriate timeframe;

3° The corrections concerning the prudent valuation of the trading book are insufficient to enable the investment firm to sell or hedge its positions within a short timeframe without exposing itself to significant losses under normal market conditions;

4° The examination carried out pursuant to Article L. 533-2-3 that failure to comply with the requirements governing the use of authorised internal models is likely to result in inadequate levels of capital;

5° On several occasions, the investment firm has failed to establish or maintain an adequate level of additional own funds as provided for in Article L. 533-4-5.

In accordance with the aforementioned provisions, the Autorité de contrôle prudentiel et de résolution may impose an additional capital requirement on Class 3 investment firms on the basis of a case-by-case assessment where it deems this to be justified.

An Order of the Minister responsible for the economy specifies the conditions under which risks or risk elements are considered not to be covered or insufficiently covered by the capital requirements, the level and nature of the additional capital set by the Autorité de contrôle prudentiel et de résolution and the procedures surrounding the decision of the Autorité to impose an additional capital requirement.