The EU Capital Requirements Directive (CRD) sets out the regulatory capital framework which is overseen in the UK by the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) through the General Prudential Sourcebook (GENPRU) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU). From 1st January 2014, with the implementation of the Capital Requirement Directive IV (CRV IV), regulations under BIPRU for this firm have been replaced by:
The FCA framework consists of three Pillars:
The Financial Conduct Authority outlines the minimum disclosure requirements. The information below satisfies WTDFM Ltd Pillar 3 requirement.
Frequency of Disclosure
WTDFM Ltd will report their Pillar 3 disclosure annually or upon material change. These disclosures are based on the firms’ audited accounts as at the 31st December 2018. The Pillar 2 (ICAAP) capital requirements are excluded from this summary but are reviewed annually or upon material change.
Location and Verification
These disclosures have been validated by the managing director. These disclosures are not subject to an audit except to the extent where they are equivalent to disclosures made under accounting requirements.
Scope of Application
This disclosure is made solely by WTDFM Ltd.
The managing director of the firm, in addition to the risk mapping structure of the ICAAP, is very much involved with the day to day running of the firm including the continual assessment of risk.
He meets with his senior team on a regular basis to discuss current projections, performance against budget, and risk management.
The managing director manages the firms’ risks through a framework of policy and procedures having regard to the relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework.
The firm is relatively small with an operational infrastructure appropriate to its size.
The ICAAP has identified the most significant risk types to WTDFM Ltd to be as follows:
This is the risk associated with inadequate, or the failure of, internal processes or external factors such as regulation.
The legislative and political environment that WTDFM Ltd operates in could be made more restrictive therefore reducing or removing profitability. Mitigating this is that other systems are available to structure the business should the current business model become unavailable or impractical to use.
People risk is mitigated by the flexibility of the workforce to cover each key member’s responsibilities with no individual being critical to the company.
IT risk is mitigated with daily back-ups, remote access and an efficient continuity plan.
This is the risk that external factors, such as a fall in the markets, could result in an unexpected loss.
A slowing economic environment could lead to a lessening appetite for the services offered by WTDFM Ltd. This is mitigated by a low cost structure, flexible working patterns, and an established client base.
Reputational risk could be involved if WTDFM Ltd recommended a fund that fails. This is mitigated by the Investment Committee assessing all decisions made by WTDFM Ltd.
This is the risk that WTDFM Ltd will have insufficient funds to meet their capital requirements.
WTDFM Ltd is sufficiently financially robust to suffer a long period without any income generation and has the ability to raise further capital should they require.
This is the risk that either too much of WTDFM Ltd business is concentrated in too small a sphere of operation or that the client base is concentrated in too few accounts.
WTDFM Ltd has strong relationships with a wide base of clients.
Core Tier 1 Capital – Capital Requirements Exceeded
Total Tier 2 Capital – Not Required
Capital Adequacy in compliance with IFPRU 3, 4, 6 & 7
WTDFM Ltd have forecasts in place to ensure that they will continue to meet there regulatory capital requirements on an ongoing basis.
WTDFM Ltd is a BIPRU limited activity firm (BIPRU 50K Firm) and, as such, is not required to calculate their operational risk capital under Pillar 1 in accordance with BIPRU 6. Instead they are required to calculate a Fixed Overhead requirement is accordance with GENPRU 2.1 53R. The following figures are based on GABRIEL return December 2018.
Solvency Ratio 135.89%
BIPRU 11.5.18R requires that a firm makes a disclosure of details regarding its remuneration policy.
Given the relatively small size of the firm, remuneration policy for all staff is set by the managing director in conjunction with the finance director & COO. The remuneration policy is based upon individual financial and non-financial criteria, along with overall firm performance. The overall level of remuneration is set in the form of a base salary and a bonus. The resources available for bonuses are directly linked to the performance of the firm.
WTDFM Ltd has one key business activity that of managing funds and under BIPRU 11.5.20R, the firms does not consider it is “significant in terms of size, internal organisation and nature and scope of its activities” so is not required to disclose the quantitative information referred to in BIPRU 11.5.18R at the level of senior personnel.
The firm falls with FCA proportionality Level 3 and as such disclosure is made in line with the requirements for a Level 3 firm.
The number of identified code staff equates to the number of FCA registered CF30s in the firm.
Should you have any queries please contact:
Carol Starkey – email@example.com