Pillar 3 Disclosure Statement
Thornbridge Investment Management LLP (“TIM”) is authorised and regulated by the UK Financial Conduct Authority (“FCA”) as an investment manager and as such is subject to the capital adequacy rules set out in the Financial Conduct Authority’s (“FCA”) BIPRU sourcebook. As a BIPRU firm TIM is subject to rules set out in the third European Capital Adequacy Directive (“CRD III”) and is not required to follow the rules of the fourth European Capital Adequacy Directive (“CRD IV”).
The capital adequacy framework consists of three Pillars:
- Pillar 1 sets out the minimum capital amount that meets the Firm’s credit, market and operational risk;
- Pillar 2 requires the Firm to assess whether its Pillar 1 capital is adequate to meet its risks and is subject to annual review by the FCA (the ICAAP as set out below); and
- Pillar 3 requires disclosure of specified information about the underlying risk management controls, capital position and remuneration. This document is TIM’s Pillar 3 disclosure statement.
As required by the rules of the FCA TIM has undertaken an ‘Internal Capital Adequacy Assessment Process’ (“ICAAP”). The ICAAP is reviewed annually or whenever there is a material change to the business, whichever is sooner. The most recent ICAAP review was undertaken as at 31 March 2019. The ICAAP process considered the risks that TIM is exposed to and the controls that exist to mitigate those risks. It further considered whether additional capital was required to meet the risks that TIM faces including, as required by the FCA rules, the potential cost of closing TIM down in the unlikely event that such action was necessary. TIM ’s Pillar 1 capital requirement is the higher of the base capital requirement of EUR 50,000, the sum of the credit risk and market risk requirements and the fixed overhead requirement. Currently the fixed overhead requirement is the highest of these three requirements and the capital requirement amounts to £273,000. TIM have assessed that there is no additional capital requirement under Pillar 2 and thus the Pillar 2 Capital requirement is also £273,000.
TIM is an asset manager and does not risk its own capital in the financial markets. TIM does not have regulatory permission to take proprietary trading risk and does not take such risk. Accordingly, the risks that TIM faces are more limited in scope than for other types of regulated firms. The risks and controls detailed below are, in accordance with the BIPRU rules, risks that TIM faces in respect of its own activities. The risk management processes and controls for monies managed by TIM are not part of these disclosures.
The capital of TIM is in the form of eligible members’ capital plus retained earnings. All of the capital of the company is Tier 1 capital. As at 31 March 2019 TIM had Tier 1 capital of £431,000.
Approach to risk
TIM has identified and performed an assessment of the key risks that may impact its business. TIM is an investment manager and does not undertake proprietary trading. The material risks to TIM largely fall within the “Business Risk” and “Operational Risk” categories.
Principal risks and uncertainties
For the purposes of these disclosures, market risk is the risk value of, or income arising from, TIM ‘s assets and liabilities varying as a result of changes in the market price of financial assets, changes in exchange rates or changes in interest rates.
TIM does not take proprietary trading risk. TIM ‘s risk management activities are on behalf of clients and TIM ‘s own money is not at risk. The only market risks that TIM potentially face is currency risk due to the mismatch of the currencies in which income is earned and the currencies in which costs are incurred. Currently this risk does not exist.
Credit risk refers to the potential risk that TIM ’s bankers or customers fail to meet their obligations as they fall due.
TIM has appropriate policies to monitor this exposure on an ongoing basis.
TIM ‘s liquidity policy is to maintain sufficient liquid resources to cover cash flow imbalances and fluctuations in fees received/receivable. TIM maintains cash balances at its bankers to cover liquidity risk.
Operational risk is the risk of loss arising from failed or inadequate internal processes or systems, human error or other factors. The risk is managed by the members who have responsibility for putting in place appropriate controls for the business. TIM documents the risks that it is exposed to and the compensating controls in its ICAAP.
Business risk is the risk that TIM may not be able to carry out its business plan and could therefore suffer losses if its income falls. This is a risk that all businesses face. The members continuously monitor income and expenditure levels and adjust their plans accordingly.
Concentration risk is the risk that TIM is overly dependent upon any one customer or any one group of connected customers either in terms of income dependency or in terms of credit risk. TIM has a diversified income source and is not subject to concentration risk.
Pension obligation risk
TIM has no defined benefit schemes and thus has no pension obligation risk.
Interest rate risk
TIM is not exposed to interest rate risk.
Residual risk is any risk not covered by the specific risk categories outlined above.
The members do not consider that there are any residual risks that require the Company to maintain any additional capital.
Under the Remuneration Code (the “Remuneration Code”), TIM, as is standard for an investment management firm, is classified as a Proportionality Level three firm. Proportionality Level three firms are permitted to disapply many of the technical requirements of the Remuneration Code and proportionately apply the Remuneration Code’s rules and principles in establishing TIM ’s policy.
As at 31 March 2019 TIM had 2 code Staff. TIM has only one business area which is its investment management business.
The Decision-Making Process
TIM has concluded that, on the basis of its size, the nature, scale and complexity of its legal structure and business and the nature of the risks that it takes on behalf of clients, it does not need to appoint a remuneration committee. TIM believes that its Remuneration Policy appropriately addresses potential conflicts of interest and that TIM ’s authorised persons are not rewarded for taking inappropriate levels of risk. The policy is reviewed at least annually and will be amended, as and when required due to changes in regulation as well as TIM ’s own decision making process.
The link between pay and performance
As the only code staff are members of the LLP this is not applicable.
Quantitative Remuneration Data
TIM has concluded that it is not required to publish quantitative remuneration data relating to code staff on the grounds of proportionality, there only being 2 code staff.