VINTAGE ASSET MANAGEMENT LIMITED (REGISTERED NUMBER 06694183)
PILLAR 3 RISK DISCLOSURE STATEMENT
For the Year Ended 31 March 2018
The information provided on the following pages 1 to 5 is required to be disclosed in accordance with the rules adopted by the Financial Conduct Authority.
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 is verified by the board. Unless otherwise stated, all figures are as at the 31 March 2018 financial year-end.
Pillar 3 disclosures will be issued on an annual basis after the year end and published with the annual accounts.
The Firm has a risk management process in place to ensure that it has in place 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; the Compliance Officer is responsible for the implementation and enforcement of the Firm’s risk principles.
The Firm will take appropriate action if any risks identified falls outside of the Firm’s tolerance for risk or if it identifies weakness in the Firm’s mitigating controls.
The Board of Directors meets quarterly to review operational matters and to review management accounts to demonstrate the adequacy of the Firm’s regulatory capital.
Specific risks applicable to the Firm come under the headings of business, operational, credit, market, and liquidity and are considered below.
The risks to revenue from a decline in assets under management (AUM) would arise from a sharp fall in markets for a protracted period and from a loss of clients assets, to which portfolio losses might contribute.
There is some mitigation from the firm’s approach with a focus on capital preservation which is intended to smooth volatility in portfolios. Client agreements include redemption terms that require a three month notice period thus mitigating against the rapid drawdown of assets.
The Firm has established operational procedures and controls to reduce risks which might relate to systems, third party providers, people including key man, technology, business process and data management.
The firm manages these risks against standard industry controls as identified in industry best practice; the Firm has in place a compliance framework to oversee the risk management process.
The Firm’s senior management review the 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.
The main credit risk to which the firm is exposed is in respect of its debtors primarily of investment management fees which the majority of clients pay by debits to their portfolios. There has been no history of bad debts and as such there is limited counterparty risk.
The Firm’s bank accounts are held with large international credit institutions.
Given the nature of the Firm’s exposures, no specific policy for hedging and mitigating credit risk is in place. The Firm uses the simplified standardised approach detailed in BIPRU 3.5.5 of the Financial Conduct Authority 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 Financial Conduct Authority Handbook.
Since the Firm holds no equity portfolios on its balance sheet, the Firm has no Equity exposure.
Since the Firm holds no trading book positions on its balance sheet the Firm takes no market risk. Further, it is not subject to foreign exchange risk as fees due are typically received in GBP.
The Firm retains an amount it considers suitable for providing sufficient liquidity to meet the working capital requirements under normal business conditions. Furthermore, it has historically been the case that all management fee debtors are settled promptly, thus ensuring further liquidity resources are available to the Firm on a timely basis.
The cash position of the Firm will be monitored by the Compliance Officer on a monthly basis and the Firm is able to call upon the support of its Directors as required.
As at 31 March 2018 the firm held regulatory capital resources of £797,616. This is comprised solely of core Tier 1 capital in the form of share capital and audited reserves.
As at 31 March 2018, the firm’s Pillar 1 capital requirement was £194,000. 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 calculating the FOR. The firm will monitor its expenditure on a monthly basis and take into account any material fluctuations in order to determine whether the FOR remains appropriate to the size and nature of the business or whether any adjustment needs to be made intra-year. In the course of such determinations if it is projected that the FOR will exceed the base capital requirement and, it will thus become the determining factor of the capital requirement. Thus, any further capital will be injected into the business in order to meet the anticipated expansion of the business.
The capital adequacy position will be monitored by the Compliance Officer and reported to the Board on a monthly basis.
Satisfaction of capital requirements
The firm’s ICAAP (Pillar 2) has identified capital to be held over and above the Pillar 1 requirement of £10,000, the capital resources detailed above are therefore still adequate for this purpose. In managing its capital, the Firm considers the variety of requirements and expectations. Sufficient capital will be set in place to support 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 31 March 2018
Scope and application of the requirements
BIPRU 11.5 sets out the disclosure requirements in relation to the remuneration of code staff which all Financial Conduct Authority regulated firms are required to comply. The company is a Tier 4 firm and the following disclosures are intended to fully satisfy the requirements of the remuneration code (“the Code”).
Disclosure of compliance with the Remuneration Code
The Company has in place internal policies, practices and procedures consistent with the Financial Conduct Authority’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, including their overriding responsibility to ensure that the Company’s remuneration and dividend policies, practices and procedures:
– are in line with the business strategy, objectives and long-term interests and values of the Company;
– are consistent with and promote sound and effective risk management and do not encourage risk taking that exceeds the level of tolerated risk of the Company;
– are appropriate to attract, motivate and retain suitable staff;
– are representative of the underlying performance of the business and do not reward individuals for poor performance;
– and include measures to avoid conflicts of interest.
The following disclosures have been made in accordance with the Financial Conduct Authority rules and regulations as outlined under BIPRU 11.5.18 and SYSC 19A, specifically in the context of the Company’s obligations under the Financial Conduct Authority’s remuneration code.
As permitted by the Code, the company has adopted the Financial Conduct Authority’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 Company’s 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 Company 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 Financial Conduct Authority’s proportionality approach for Tier 4 firms, the company has elected not to apply the Financial Conduct Authority’s 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 fully 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 Company’s Code staff, all of whom have been approved by the Financial Conduct Authority under section 59 of the Financial Services and Markets Act 2000 to perform a controlled function, received aggregate remuneration and dividends of £331,501 during the year ended 31 March 2018.