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Financial Options as stated on your AFS Licence

Option 1

Means the reasonable estimate projection plus cash contingency basis where the licensee is required to:

  1. prepare a projection of the licensee's cash flows over at least the next 3 months based on the licensee's reasonable estimate of what is likely to happen over this term; and
  2. document the licensee's calculations and assumptions, and describe in writing why the assumptions relied upon are the appropriate assumptions; and
  3. update the projection of the licensee's cash flows when those cash flows cease to cover the next 3 months or if the licensee has reason to suspect that an updated projection would show that the licensee was not meeting paragraph (d) of this definition; and
  4. demonstrate, based on the projection of the licensee's cash flows, that the licensee will have access when needed to enough financial resources to meet its liabilities over the projected term of at least 3 months, including any additional liabilities the licensee projects will be incurred during that term; and
  5. hold (other than as trustee) or be the trustee of a relevant trusts that holds, in cash an amount equal to 20% of the greater of:
    1. the cash outflow for the projected period of at least 3 months, adjusted to produce a 3-month average; or
    2. the licensee's actual cash outflow for the most recent financial year for which the licensee has prepared a profit and loss statement (i.e: Statement of Financial Performance), adjusted to produce a 3-month average.

For the purposes of this definition references to the licensee's cash flow include the licensee's own cash flow and any cash flow of a relevant trust but do not include cash flows of any other trust.

For the purposes of paragraph (e) of this definition, “cash” means:

  1. current assets valued at the amount of cash for which they can be expected to be exchanged within 5 business days; or
  2. a commitment to provide cash from an eligible provider that can be drawn down within 5 business days and has a maturity of at least a month; but does not include any cash in a relevant trust if the licensee has reason to believe that the cash will not be available to meet all of the projected cash flows of the licensee.

Option 2

Means the cash needs requirement on the contingency-based projection basis where the licensee is required to:

  1. prepare a projection of the licensee's cash flows over at least the next 3 months based on the licensee's estimate of what would happen if the licensee's ability to meet its liabilities over the projected term (including any liabilities the licensee might incur during the term of the projection) was adversely affected by commercial contingencies taking into account all contingencies that are sufficiently likely for a reasonable licensee to plan how they might manage them; and
  2. document the licensee's calculations and assumptions, and describe in writing why the assumptions relied upon are the appropriate assumptions; and
  3. update the projection of the licensee's cash flows when those cash flows cease to cover the next 3 months or if the licensee has reason to suspect that an updated projection would show that the licensee was not meeting paragraph (d) of this definition; and
  4. demonstrate, based on the projection of the licensee’s cash flow, that the licensee will have access when needed to enough financial resources to meet its liabilities over the projected term of at least 3 months, including any additional liabilities the licensee might incur during that term.

For the purposes of this definition references to the licensee's cash flow include any cash flow of a relevant trust.