Pillar 3 disclosure
TIML Limited trading as Tacit Investment Management Pillar 3 and Remuneration Code Disclosures
FCA Register Number: 670184
This is the Pillar 3 disclosure made in accordance with the UK Financial Conduct Authority (FCA) Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’).
The European Capital Requirements Directive (CRD) created a revised regulatory capital framework based on the provisions of the Basel 2 Capital Accord.
The new framework consists of three ‘pillars’ namely;
Pillar 1 – which sets out the minimum capital requirements that firms are required to meet for credit, market and operational risk;
Pillar 2 – which requires firms to take a view on whether additional capital should be held against capital risks not covered by Pillar 1; and
Pillar 3 – which requires firms to publish certain details of its risks, capital and risk management process.
2. Disclosure policy
The rules in BIPRU 11 provide that the firm may omit one or more of the required disclosures if it believes that the information is immaterial. Materiality is based on the criteria that the omission or misstatement of material information would be likely to change or influence the assessment or decision of a user relying on that information for the purposes of making economic decisions. Where the firm considers a disclosure to be immaterial, this will be stated in the relevant section.
The firm is also permitted to omit one or more of the required disclosures where it believes that the information is regarded as proprietary or confidential. Proprietary information is that which, if it were shared, would undermine the firm’s competitive position. Information is considered to be confidential where there are obligations binding the firm to confidentiality with its clients and counterparties.
Where the firm has omitted information for any of the above reasons, a statement explaining this will be provided in the relevant section.
Unless stated as otherwise, all figures contained in this disclosure are based on the firm’s audited annual reports for the year ending 30th June 2019.
These Pillar 3 Disclosures will be reviewed on an annual basis as a minimum. The disclosures will be published as soon as is practical following the finalisation of the firm’s Internal Capital Adequacy Assessment Process (ICAAP) and the publication of its annual reports.
The information contained in this disclosure has not been audited by our firm’s external auditors and does not constitute any form of financial statement.
Our firm’s Pillar 3 Disclosure reports are included in our audited accounts.
6. Scope and application of directive requirements
The disclosures in this document are made in respect of TIML Limited which provides discretionary investment management services.
The firm is a limited licence firm as defined by the FCA.
7. Risk management objectives and policies
Our risk management policy reflects the FCA requirement that we must manage a number of different categories of risk. These include: liquidity, credit, market, interest rate, business and operational risks.
The firm manages all cash and borrowing requirements to maximise potential interest income whilst ensuring the firm has sufficient liquid resources to meet the continued operating needs of the business. This is supported by a robust budgeting and forecasting process which has the full involvement of the Board.
TIML Limited’s revenue includes annual management fees received from clients based on a percentage of funds under management. These charges are made directly to the clients’ portfolios therefore the credit risk relating to this income is negligible.
The firm is indirectly subject to market risk as a significant element of income is dependent upon the value of client funds under management. This risk is mitigated by the asset allocation strategy adopted, which ensures that clients have highly diversified portfolios with limited exposure to any one asset class. Accordingly, exposure to market risk is considered minimal.
Interest rate risk
The firm has no borrowings and no exposure to interest rate risk.
The TIML Limited’s Pillar 2 risk assessment, seeks to assess the risk to the business of a fall in assets under management following a market downturn that leads, in turn, to lower management fees. Other risks, such as loss of key personnel, loss of clients and systems failures, are also considered.
Operational risk is defined as the potential risk of financial loss or impairment to reputation resulting from inadequate or failed internal processes and systems, from the actions of people or from external events.
Major sources of operation risk include: outsourcing of operations, IT security, internal and external fraud, implementation of strategic change and regulatory non-compliance.
TIML Limited operates a robust risk management process which is regularly reviewed and updated with details being provided to all staff. The firm’s Compliance Oversight is responsible for the periodic reviews and recommending any changes to the Board.
All senior management will bear responsibility for internal controls and the management of business risk as part of their accountability to the Board.
Individuals are responsible for identifying the risks surrounding their work, implementing controls over those risks and reporting areas of concern to their line manager.
The firm operates a simple business model. Accordingly, many of the specific risks identified by the FCA do not apply.
8. Capital resources
Pillar 1 requirement
In accordance with GENPRU 2.1.45R, (the calculation of variable capital requirement for a BIPRU firm), our capital requirement has been determined as being our fixed overhead requirement and not the sum of our credit risk capital requirement and our market risk capital requirement.
The Pillar 1 capital requirement for TIML Limited was €58,000 as at 30th June 2019.
Our overall approach to assessing the adequacy of our internal capital is set out in our ICAAP. The ICAAP process involves separate consideration of risks to our capital combined with stress testing using scenario analysis. The level of capital required to cover risks is a function of impact and probability. We assess impact by modelling the changes in our income and expenses caused by various potential risks over a 1-year time horizon. Probability is assessed subjectively.
In addition, we have reviewed the outputs of our risk reviews to quantify any risks identified. This has identified a number of key business risks which we have classified against the risk categories contained in GENPRU 1.2.30R and reviewed the guidance in BIPRU 2.2.61-65.
TIML Limited’s Pillar 2 capital requirement, which is our own assessment of the minimum amount of capital that we believe is adequate against the risks identified, has been assessed as lower than our Pillar 1 requirement. There is a considerable surplus of reserves above the capital resource requirement deemed necessary to cover the risks identified.
The main features of TIML Limited’s capital resources for regulatory purposes, as at 30th June 2019 are as follows:
The firm holds regulatory capital in accordance with the Capital Requirements Directive. All such capital is classified as Tier 1 capital and is therefore of the highest quality.
9. Remuneration code disclosure
The firm is subject to the Remuneration Code and is categorised as a Level 3 firm. This section provides further information on our remuneration policy along with relevant quantitative data.
Decision Making / Remuneration Committee
TIML Limited has a Remuneration Committee comprising the Board of Directors.
The principle terms of reference for the Remuneration Committee include:
- Determining the framework and policy for remuneration and ensuring it does not encourage undue risk taking.
- Considering and advising on any major changes in remuneration structures.
- Reviewing the terms and conditions of any new incentive schemes and in particular, considering the appropriate targets for any performance related remuneration schemes.
- Considering and recommending the remuneration policy for the senior employees. In doing so the Remuneration Committee will consider the appropriate mix of salary, discretionary bonus and share based remuneration.
- In determining remuneration arrangements, the Remuneration Committee will give due regard to best practice and any relevant legal or regulatory requirements including the FCA Remuneration Code.
Link Between Pay & Performance
Competitive salaries form the basis of our firm’s remuneration package. In addition there is an element of variable pay for all staff which is based on firm wide and individual performance. Whilst most of the variable reward components are awarded to employees across the firm, the structure, balance and amounts may differ. Variable remuneration is considerably reduced where subdued or negative financial performance of the firm occurs.
When assessing individual performance we use a robust performance review process, with reviews including qualitative criteria.
Aggregate Quantitative Information on Remuneration
We are subject to data protection legislation when disclosing remuneration information. The Data Protection Act prohibits disclosing information that will result in individual information being easily identifiable. Remuneration disclosures will therefore be made on a limited basis in terms of any publicly or Company-wide circulation. However, all necessary information will be made available to the FCA on request.