Pillar 3 Disclosure

Capital Requirements Directive Pillar 3 Disclosure

Background 

The Capital Requirements Directive (‘the Directive’) of the European Union created a revised regulatory capital framework across Europe governing how much capital financial services firms must retain. In the United Kingdom, this is being implemented by our regulator, the Financial Conduct Authority (‘FCA’) who has created new rules and guidance specifically through the creation of the General Prudential Source book (‘GENPRU’) and the Prudential Source book for Banks, Building Societies and Investment Firms (‘BIPRU’).The new FCA framework consists of three ‘Pillars’: Pillar 1 sets out the minimum capital requirements that we need to retain to meet our credit, market and operational risk; Pillar 2 requires us, and the FCA, to take a view on whether we need to hold additional capital against firm-specific risks not covered by Pillar 1; and Pillar 3 requires us to develop a set of disclosures which will allow market participants to assess key information about our underlying risks, risk management controls and capital position. The rules in BIPRU 11 set out the provision for Pillar 3 disclosure. This must be done in accordance with a formal disclosure document. The disclosure of this document meets our obligation with respect to Pillar 3.The rules provide that we may omit one or more of the required disclosures if we believe that the information is immaterial. Materiality is based on the criterion that the omission or misstatement of any information would be likely to change or influence the decision of a reader relying on that information. Where we have considered a disclosure to be immaterial, we have stated this in the document. In addition, we may also omit one or more of the required disclosures where we believe that the information is regarded as proprietary or confidential. In our view, proprietary information is that which, if it were shared, would undermine our competitive position. Information is considered to be confidential where there are obligations binding us to confidentiality with our customers, suppliers and counterparties. Where we have omitted information for either of these two reasons we have stated this in the relevant section and the reasons for this. 

Scope and application of the requirements

The Firm is authorised and regulated by the FCA and has permission to provide investment management services to professional clients.

Risk management

The Members determine the firm's business strategy and risk appetite along with designing and implementing a risk management framework that recognizes the risks that the business faces. They also determine how those risks may be mitigated and assess on an ongoing basis the arrangements to manage those risks. The Members meet on a regular basis and discuss current projections for profitability and regulatory capital management, business planning and risk management. The Members manage the Firm’s risks though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required. The Firm follows the standardised approach to market risk and the simplified standard approach to credit risk.

Capital Requirements Directive Pillar 3 disclosure

As at 31 December 2021, the firm's Pillar 1 requirement was £330,000 and Pillar 2 requirement was £166,000.

The firm is a limited licence firm and as such its capital requirement is the greater of: Base capital requirement of €50,000; or the sum of its market, and credit risk requirement or fixed overhead requirement; or its Internal Capital Adequacy Assessment Process (Pillar II) requirement. The firm has not omitted any disclosures on the grounds of confidentiality. At the year end the firm’s market risk was £38,000 and credit risk was £18,000.

Disclosures: Remuneration

During the year the members reviewed the drawings policy in light of the rules and guidance contained in the FCA Remuneration Code ("the Code"). The proportionality principle contained in the Code rules requires the firm to comply with the Code only in a way and to the extent that is appropriate to its size, internal organization and the nature, the scope and the complexities of its activities. The Firm falls within the lowest level of Code categorization, which means that it is not required to comply with some of the prescriptive rules set out in the Code. In fixing the remuneration packages for current and future financial years the Member's have the following in mind:

The FCA defines Remuneration Code Staff ("Code Staff") as senior management, risk takers, staff engaged in control functions and any employee receiving total remuneration that takes them into the same remuneration bracket as those detailed above, whose professional activities have a material impact on the firm's risk profile.

Application

We have considered our individual needs on an ongoing basis and where appropriate applied certain provisions in accordance with FCA guidance. The Managing Member will review any provisions which have been applied on at least an annual basis, to ensure that it continues to be appropriate. Information concerning the decision-making process. Due to the size of the Firm, we do not consider it appropriate to have a separate remuneration committee. Instead this function is undertaken by the Managing Board. This will be kept under review and should the need arise the Firm will consider amending this arrangement to provide greater independent review.   The Managing Member makes final decisions

Due to the size and nature of the Firm and limited number of staff, quantitative disclosures in relation to compensation have not been included.

Further Enquiries

Should you have any queries please contact:

Chee-Won Tan
Head of Compliance

Theorema Advisors UK LLP
20 Balderton St
London
W1K 6TL