VINTAGE ASSET MANAGEMENT LIMITED (REGISTERED NUMBER 06694183)
PILLAR 3 RISK DISCLOSURE STATEMENT
For the Year Ended 31st March 2020
Vintage Asset Management Limited (‘the firm’) is required by the Financial Conduct Authority (FCA) to disclose information relating to the capital it holds and each category of material risk it faces in order to assist users of its accounts and to encourage market discipline. These disclosures aim to provide information on the risk exposures faced by the firm and the risk assessment process it has in place to monitor these. Known as Pillar 3 disclosures, they are required to be made under Chapter 11 of the Financial Conduct Authority’s Prudential Sourcebook for Investment Firms (BIPRU) and are seen as complimentary to the firm’s minimum capital requirement calculation (Pillar 1) and the internal review of its capital adequacy (Pillar 2).
The Pillar 3 disclosure document has been prepared by the firm in accordance with the requirements of BIPRU 11 and has been verified by the board of directors. Unless otherwise stated, all figures are as at the 31st March 2020 financial year-end.
The board will issue Pillar 3 disclosures on an annual basis after the year-end and will publish it with the annual accounts or directly to the firm’s website.
The firm has a risk management process in place to ensure that it has effective systems and controls so as to identify, monitor and manage risks arising in the business. The firm’s senior management review the process regularly to enhance it as required.
The firm’s board of directors take overall responsibility for the risk management process and for setting its risk appetite; its Compliance Officer is responsible for the implementation and enforcement of the firm’s risk principles.
The firm will take appropriate action if any risks it identifies falls outside of the tolerance for risk or if it identifies weakness in mitigating controls.
The board meets quarterly to review compliance and operational matters and to assess management accounts that demonstrate the adequacy of the firm’s regulatory capital.
The board has identified specific risks applicable to the firm as business, operational, credit, equity, market and liquidity.
The firm faces a risk to its revenue from a decline in assets under management that would arise from a sharp fall in markets for a protracted period and from a loss of client assets, to which poor portfolio returns might contribute.
There is some mitigation from the firm’s investment approach with a focus on smoothing volatility in portfolios, which is intended to assist in capital preservation. The business has a broad spread of clients while its agreements with them include redemption terms that require a three-month notice period. The firm can also call on its capital reserves.
The firm faces risks which might arise in relation to its administration and trading in particular on systems, third party providers, people, technology, business process and data management.
The firm has established operational procedures and controls to reduce the potential risks; the board regularly review the robustness of these procedures and those of its counterparties. The firm’s senior management undertakes a full risk assessment at least annually. While the primary focus is on mitigating risk the firm does hold professional indemnity insurance to protect against any losses that may arise as well as key man insurance.
The main credit risk to which the Firm is exposed is in respect of the investment management fees it collects, which constitute the majority of debtors, and on the cash it holds on deposit.
There is mitigation in that the majority of fees are debited to client portfolios and that firm’s bank accounts are held with large international credit institutions. There has been no history of bad debts.
Given the nature of the firm’s exposures there is no specific policy for hedging and mitigating credit risk. The firm uses the simplified standardised approach detailed in BIPRU 3.5.5 of the FCA Handbook when calculating risk-weighted exposures in respect of its debtors; this amounts to 8% of the total balance due. All bank balances are subject to a risk-weighted exposure of 1.6% in accordance with BIPRU 3.4 of the FCA Handbook.
The firm holds a portion of its capital in investment portfolios, for which the equity component at the year-end was approximately 43%. There is some mitigation in that the portfolios follow the same investment approach as for clients while there is daily liquidity in the holdings.
While the firm faces an indirect risk from markets given the potential impact on client portfolios it does not hold any client assets nor any trading positions. The firm’s collection of fees in Sterling minimises foreign exchange risk.
The firm retains an amount of capital it considers suitable for providing sufficient liquidity to meet its working capital requirements under normal business conditions.
The firm’s Compliance Officer monitors the cash position on a monthly basis.
The firm would expect to be able to call upon the support of its owner directors if required.
As at 31st March 2020 the firm held regulatory capital resources of £1,162,591. This comprises solely core Tier 1 capital in the form of share capital and audited reserves.
As at 31st March 2020 the firm’s Pillar 1 capital requirement was £201,000. The requirement is presently based on the Fixed Overheads Requirement (FOR) since this exceeds the total of the credit and market risk capital requirements it bears and also exceeds its Base Capital Requirement of €50,000.
The FOR is based on annual expenses and no allowable deductions were made from this total for the purposes of its calculation. The firm will monitor its expenditure on a quarterly basis and take into account any material fluctuations so as to determine whether the FOR remains appropriate to the size and nature of the business or whether it would need to make any adjustment intra-year. The board reviews the capital adequacy position on a quarterly basis.
Satisfaction of capital requirements
The firm’s ICAAP (Pillar 2) has identified capital it should hold over and above the Pillar 1 requirement at £55,000 and as such it has capital resources detailed that are adequate for this purpose. In managing its capital, the firm considers the variety of requirements and expectations; it will retain sufficient capital to support its current and projected business activities, in accordance with both the firm’s own internal assessment and the requirements of its regulator.
Vintage Asset Management Limited (Registered Number 06694183)
PILLAR 3 REMUNERATION CODE STATEMENT
For the Year Ended 31st March 2020
Scope and application of the requirements
BIPRU 11.5 sets out the disclosure requirements in relation to the remuneration of code staff with which all firms regulated by the Financial Conduct Authority (FCA) are required to comply. The company is a Tier 4 firm and the following disclosures are intended to satisfy fully the requirements of the Remuneration Code (‘the Code’).
Disclosure of compliance with the Code
The firm has in place internal policies, practices and procedures consistent with the FCA’s rules and regulations for Tier 4 firms. The board of directors form the remuneration committee and the directors fully acknowledge their responsibilities under the Code. They acknowledge their overriding responsibility to ensure that the firm’s remuneration and dividend policies, practices and procedures are:
- in line with the business strategy, objectives and long-term interests and values of the firm;
- consistent with and promote sound and effective risk management and do not encourage risk-taking that exceeds the firm’s level of tolerated risk;
- appropriate to attract, motivate and retain suitable staff;
- representative of the underlying performance of the business and do not reward individuals for poor performance; and
- inclusive of measures to avoid conflicts of interest.
The following disclosures have been made in accordance with the FCA rules and regulations as outlined under BIPRU 11.5.18 and SYSC 19A, specifically in the context of the firm’s obligations under the Code.
As permitted by the Code, the firm has adopted the FCA’s proportionality approach for Tier 4 firms in applying the requirements of the Code. All decisions in relation to the remuneration of Code staff are made and approved by the firm’s board acting as its remuneration committee, with no input from external consultants. Remuneration and dividends are determined with reference to a number of factors including, but not limited to, the performance of the individual, the firm and the individual’s adherence to the Company’s risk management and compliance procedures.
Variable remuneration which is paid in the form of bonuses and dividends is only awarded after full consideration of these factors, together with an assessment of any current or potential risks to the business in the context of these payments.
In accordance with the FCA’s proportionality approach for Tier 4 firms, the company has elected not to apply the specific regulatory requirements in relation to the fixed and variable elements of total remuneration and dividends, the payment of variable remuneration and dividends through retained shares or other instruments, the deferral of these payments or performance adjustments.
The remuneration committee believes that its remuneration and dividend policies, procedures and practices are aligned with the objectives of client assets under management and that the payment of variable remuneration and dividends is therefore aligned to the performance and success of the assets under management where the Company acts as investment manager.
The firm’s Code staff, all of whom have been approved by the FCA under section 59 of the Financial Services and Markets Act 2000 to perform a controlled function, received aggregate remuneration and dividends of £468,627 during the year ended 31st March 2020.