9.2.2 Capital requirements

395. Both Class 2 and Class 3 investment firms are subject to the IFR and the IFD. The main prudential requirements for Class 3 investment firms is a requirement for firms to hold the higher of a “permanent minimum requirement”1 consisting of an ongoing requirement at the level of the required initial capital and the “fixed overhead requirement”.2 Class 2 investment firms are also subject to a “K-factor requirement”3 that may be the “higher” capital requirement. This study will first discus the permanent minimum requirement and the fixed overhead requirement, before discussing the K-factor requirements.