Remuneration policy
Remuneration Principle 1: Risk management and risk tolerance
A firm must ensure that its remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking that exceeds the level of tolerated risk of the firm.
Policy:
The Board decides remuneration based on the Remuneration Policy
The Board considers individual entitlement based on performance across a range of metrics having regard to risk and long-term performance
The Board may change the Remuneration Policy at any time
The Board‘s policy is to reward performance based on profitable, compliant behaviours
Individuals’ remuneration consists of a basic package which is payable in any event and represents a market rate for the duties undertaken
Additional payments are entirely discretionary and will only be awarded on the basis that the individual has contributed to the long-term well-being of the business as measured across a range of factors including profitability, compliance with FCA requirements, risk management, training and competence outcomes and any other factors considered relevant
Remuneration Principle 2: Supporting business strategy, objectives, values and long-term interests of the firm
A firm must ensure that its remuneration policy is in line with the business strategy, objectives, values and long-term interests of the firm.
Policy: The business strategy of the firm is to grow revenue from:
assets under management
Growth in revenue from assets under management is subject to consistent compliance with investment objectives applicable to the relevant assets or funds.
Remuneration Principle 3: Avoiding conflicts of interest
A firm must ensure that its remuneration policy includes measures to avoid conflicts of interest.
Policy: Verification of performance in accordance with the Aequitas Wealth Management Ltd (Aequitas) Conflicts of Interest Policy forms part of the appraisal process. Any breach of the Conflicts of Interest policy may be taken into account in determining remuneration.
Remuneration Principle 4: Governance
A firm must ensure that its governing body in its supervisory function adopts and periodically reviews the general principles of the remuneration policy and is responsible for its implementation.
Policy: This Remuneration Policy is to be reviewed:
Annually
On a significant change to the business activities of the firm (i.e. a change in Part IV permission under FSMA)
On a significant new business relationship which forms a material part of the business of the firm
At such other point as the Board considers necessary in order to comply with the other Principles contained in this Remuneration Policy
Remuneration Principle 5: Control functions
A firm must ensure that employees engaged in control functions:
(1) are independent from the business units they oversee;
(2) have appropriate authority; and
(3) are remunerated:
(a) adequately to attract qualified and experienced staff; and
(b) in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control.
Policy: The Board has regard to the size, nature and complexity of the business of the firm when setting the Remuneration Policy. In a small firm there may be circumstances where the employees engaged in Senior Management functions perform more than one function and the Board has regard to the size of the firm when formulating the policy in response to Principle 5:
The following persons are engaged in Senior Management & Certified functions and are not remunerated for taking investment risk:
· Philip Stepp – SMF 3 & SMF 9
· Matthew Kidd – SMF 3
· Thomas Kelly – SMF 16 & SMF 17
· Dmitry Konev - Certified
The Board has regard to the training and competence records of those retained in Senior Management functions.
The Board has granted appropriate authority to persons engaged in Senior Management functions.
The Board regularly, in accordance with the appraisal process described in the T&C scheme, reviews the training and competence standards achieved by persons in Senior Management functions and the remuneration achieved by such persons.
Remuneration Principle 6: Remuneration and capital
A firm must ensure that total variable remuneration does not limit the firm's ability to strengthen its capital base.
Policy: The Board’s approach to variable remuneration is such that all variable remuneration is discretionary in nature.
Therefore, the policy is that the Board will not approve variable remuneration which prejudices the firm’s current regulatory capital position or any identified risk that the firm will need to strengthen its capital base.
Remuneration Principle 7: Exceptional government intervention
A firm that benefits from exceptional government intervention must ensure that:
(1) variable remuneration is strictly limited as a percentage of net revenues when it is inconsistent with the maintenance of a sound capital base and timely exit from government support;
(2) it restructures remuneration in a manner aligned with sound risk management and long-term growth, including when appropriate establishing limits to the remuneration of senior personnel; and
(3) no variable remuneration is paid to its senior personnel unless this is justified.
Policy: The firm does not benefit from exceptional government intervention. Should this become relevant the Board will revise this Policy in accordance with Remuneration Principle 7.
Remuneration Principle 8: Profit-based measurement and risk adjustment
(1) A firm must ensure that any measurement of performance used to calculate variable remuneration components or pools of variable remuneration components:
(a) includes adjustments for all types of current and future risks and takes into account the cost and quantity of the capital and the liquidity required; and
(b) takes into account the need for consistency with the timing and likelihood of the firm receiving potential future revenues incorporated into current earnings.
(2) A firm must ensure that the allocation of variable remuneration components within the firm also takes into account all types of current and future risks.
Policy:
(1) The Board has identified the following pools of variable remuneration:
a. Fees from assets under management
(2) The Board considers the following measurements of performance:
a. Growth in fees from assets under management
(3) The Board considers the following risk, capital and liquidity factors:
a. Decline in value of funds under management through market movements or performance
b. Decline in value of funds under management through departure of clients
c. Departure of staff and potential impact on future revenues
d. Pressure on fees and competitor pressure
Remuneration Principle 9: Pension policy
A firm must ensure that:
(1) its pension policy is in line with its business strategy, objectives, values and long-term interests;
(2) when an employee leaves the firm before retirement, any discretionary pension benefits are held by the firm for a period of five years in the form of instruments referred to in SYSC 19A.3.47 R (1); and
(3) in the case of an employee reaching retirement, discretionary pension benefits are paid to the employee in the form of instruments referred to in SYSC 19A.3.47 R (1) and subject to a five-year retention period.
Policy: The firm’s pension policy does not form part of performance related remuneration.
A recipient of variable remuneration in accordance with this policy may choose to pay such monies into a pension, whether provided by or through the firm or a third party.
The scenarios in (2) and (3) of Remuneration Principle 9 are not applicable to the firm.
Remuneration Principle 10: Personal investment strategies
(1) A firm must ensure that its employees undertake not to use personal hedging strategies or remuneration- or liability-related contracts of insurance to undermine the risk alignment effects embedded in their remuneration arrangements.
(2) A firm must maintain effective arrangements designed to ensure that employees comply with their undertaking.
Policy: The firm requires relevant employees to acknowledge this personal account dealing undertaking confirming that employees do not use personal hedging strategies or liability related contracts of insurance in relation to any part of their remuneration arrangements.
The firm has a process for monitoring employee trading activities and will monitor such activities to ensure compliance with this policy.
Remuneration Principle 11: Avoidance of the Remuneration Code
A firm must ensure that variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the Remuneration Code.
Policy: The board sets the policy in accordance with the Remuneration Principles.
Remuneration Principle 12: Remuneration structures - introduction
Remuneration Principle 12 consists of a series of rules, evidential provisions and guidance relating to remuneration structures.
Remuneration Principle 12(a): Remuneration structures - general requirement
A firm must ensure that the structure of an employee's remuneration is consistent with and promotes effective risk management.
Policy: When the Board reviews the policy, it will carry out the review having regard to the risks to which the firm is exposed. The appointment of new employees and the adoption of new remuneration structures for new or existing employees shall be subject to the Board’s approval that the terms of such appointments and such remuneration structures are in accordance with the policy.
Remuneration Principle 12(b): Remuneration structures - assessment of performance
A firm must ensure that where remuneration is performance-related:
(1) the total amount of remuneration is based on a combination of the assessment of the performance of:
(a) the individual;
(b) the business unit concerned; and
(c) the overall results of the firm; and
(2) when assessing individual performance, financial as well as non-financial criteria are taken into account.
Policy: Different individuals will have different performance related assessments. This policy enables the Board to properly consider all the factors referred to in Principle 12(b) when assessing individual performance.
The Board has regard to the appraisal of the employee when setting total remuneration. The performance of individuals will be assessed in terms of their overall contribution to the well-being and future well-being of the business. This will include their performance against T&C outcomes, compliance with the approved person’s principles (APER), compliance with company procedures, risk management requirements and principles.
Remuneration Principle 12(c): Remuneration structures - guaranteed variable remuneration
A firm must not award, pay or provide guaranteed variable remuneration unless it:
(1) is exceptional;
(2) occurs in the context of hiring new Remuneration Code staff; and
(3) is limited to the first year of service.
Policy: The firm does not have any such guaranteed variable remuneration arrangements in place. If the firm proposes such arrangements the Board will consider compliance with the Remuneration Principles before approving such arrangements.
Remuneration Principle 12(d): Remuneration structures - ratios between fixed and variable components of total remuneration
A firm must set appropriate ratios between the fixed and variable components of total remuneration and ensure that:
(1) fixed and variable components of total remuneration are appropriately balanced; and
(2) the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component.
Policy: The Board has decided to disapply this Principle in relation to the firm on the basis that it is not appropriate to a firm of its size, internal organisation and the nature, the scope and the complexity of its activities. The Board will reconsider this decision annually.
Remuneration Principle 12(e): Remuneration structures - payments related to early termination
A firm must ensure that payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure.
Policy: The firm does not make payments in relation to early termination of employees unless it is considered to be in the interests of the firm.
For example, it may be in the interests of the firm to terminate an employment contract early having regard to the potential damage leaving such contract may have on other employees, the firm, its reputation, and any other factors relevant to the performance of the firm whether under the Remuneration Principles, the FCA Rules or any other reason.
Remuneration Principle 12(f): Remuneration structures - retained shares or other instruments
(1) A firm must ensure that a substantial portion, which is at least 50%, of any variable remuneration consists of an appropriate balance of:
(a) shares or equivalent ownership interests, subject to the legal structure of the firm concerned, or share-linked instruments or equivalent non-cash instruments in the case of a non-listed firm; and
(b) where appropriate, capital instruments which are eligible for inclusion at stage B1 of the calculation in the capital resources table, where applicable that adequately reflects the credit quality of the firm as a going concern.
(2) The instruments in (1) must be subject to an appropriate retention policy designed to align incentives with the longer-term interests of the firm.
(3) This rule applies to both the portion of the variable remuneration component deferred in accordance with SYSC 19A.3.49 R and the portion not deferred.
Policy: The Board has decided to disapply this Principle on the basis that it is not appropriate to a firm of its size, internal organisation and the nature, the scope and the complexity of its activities. The Board will reconsider this decision annually.
Remuneration Principle 12(g): Remuneration structures - deferral
(1) A firm must not award, pay or provide a variable remuneration component unless a substantial portion of it, which is at least 40%, is deferred over a period which is not less than three to five years.
(2) Remuneration under (1) must vest no faster than on a pro-rata basis.
(3) In the case of a variable remuneration component:
(a) of a particularly high amount, or
(b) payable to a director of a firm that is significant in terms of its size, internal organisation and the nature, scope and complexity of its activities;
at least 60% of the amount must be deferred.
(4) Paragraph (3)(b) does not apply to a non-executive director.
(5) The length of the deferral period must be established in accordance with the business cycle, the nature of the business, its risks and the activities of the employee in question.
Policy: The Board has decided to disapply this Principle on the basis that it is not appropriate to a firm of its size, internal organisation and the nature, the scope and the complexity of its activities. The Board will reconsider this decision annually.
Remuneration Principle 12(h): Remuneration structures - performance adjustment, etc.
A firm must ensure that any variable remuneration, including a deferred portion, is paid or vests only if it is sustainable according to the financial situation of the firm as a whole, and justified according to the performance of the firm, the business unit and the individual concerned.
Policy: The Board has decided to disapply this Principle on the basis that it is not appropriate to a firm of its size, internal organisation and the nature, the scope and the complexity of its activities. The Board will reconsider this decision annually.