Pillar 3 Disclosure

Introduction

The Capital Requirements Directive (‘the Directive’) of the European Union establishes a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain. In the United Kingdom, the Directive has been implemented by the Financial Conduct Authority (‘FCA’) in its regulations through the General Prudential Sourcebook (‘GENPRU’) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (‘BIPRU’).

The FCA 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; and
  • Pillar 3 requires disclosure of specified information about the underlying risk management controls and capital position.

BIPRU 11 Disclosure (Pillar 3) requires that a firm subject to the provisions of the Directive must disclose the relevant information required under this rule unless the information is believed to be immaterial, proprietary or confidential.

The disclosures in this document are made in respect of Mariana Investment Partners LLP (“MIP” or the “Firm”) in accordance with the BIPRU rule, to set out the key risks facing MIP, how it manages those risks, and how it has satisfied itself that it has sufficient capital in respect of those risks.

Frequency of disclosure

Disclosure will be made annually based on the Firm’s accounting reference date 31 December and published as soon as practicable once the annual statements are available.

Location and verification

The firm’s Pillar 3 disclosures will be made on the firm’s website www.mariana-ip.com. These disclosures are not subject to audit by the Firm’s external auditors.

Risk management

The Firm has a low appetite for risk which is reflected in the limited activities in which it is involved. Internal monitoring reduces operational risk as far as reasonably possible. The members of MIP, in addition to the risk mapping structure of the ICAAP, are very much involved with the day to day running of the Firm, including the continual assessment of risk. They meet on a regular basis to discuss current projections for profitability, regulatory capital management, business planning and risk management. The members manage the Firm's risks through 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 is relatively small with an operational infrastructure appropriate to its size.

As an investment manager, the Firm is mainly exposed to operational risk; however there is additional exposure to credit risk and foreign exchange position risk. These exposures are regarded as typical for a business engaged in investment management.

  • Operational risk

    Risk of loss from inadequate or failed internal processes, errors or security breaches. MIP seeks to avoid risks from operational processes and technology through the continued development of a robust infrastructure and adherence to documented processes and controls.

  • Credit risk

    The Firm’s exposure to its clients for non-payment of fees.

  • Position risk

    The Firm’s exposure to foreign exchange positions, being fees receivable in foreign currencies.

Capital resources

The approach of the Firm to assessing the adequacy of its internal capital to support current and future activities is contained in the Internal Capital Adequacy Assessment Process (‘ICAAP’). This process includes an assessment of the specific risks to the business and the internal controls in place to mitigate those risks.

These are reviewed under different scenarios in order to provide a robust picture of exposures for the business. Finally, an assessment is made of the probability of occurrence and the potential impact, in order to arrive at a level of required capital.

The Firm’s ICAAP is formally reviewed annually, but will be amended should there be any material changes to the Firm’s business or risk profile.

The ICAAP has identified the most significant risk types to which MIP is subject to, and therefore the suitable level of capital to be held. As a BIPUR €50,000 firm, MIP is subject to a Pillar 1 capital requirement of the greater of

  • €50,000 and;
  • Fixed overhead requirement (broadly equivalent to 3 months fixed costs)

The ICAAP concluded that additional capital above that required by Pillar 1 was not necessary. Based on the financial statements for the year ending 31 December 2014 the Firm’s Fixed Overhead Requirement is £75,000. This was met with a surplus of £48,000.

Remuneration code

The aim of the Remuneration Code (the ‘Code’) is to ensure that firms have risk focused remuneration policies which promote and are consistent with effective risk management, and do not expose firms to excessive risk.

The Firm is a Remuneration Code Proportionality Level 3 Firm and has applied the rules appropriate to its Proportionality Level. The Remuneration Committee is responsible for the Firm’s remuneration policy. All variable remuneration is adjusted in line with capital and liquidity requirements.

Remuneration code

The Firm has adopted policies in relation to the Firm’s remuneration arrangements which address potential conflicts of interest arising from such arrangements by taking into account the controls in place to guard against the Firm’s authorised persons being rewarded for taking inappropriate levels of risk.

The Firm is satisfied that the policies in place are appropriate to its size, internal organization and the nature, scope and complexity of its activities.

Link between remuneration and performance

Remuneration subject to the Code is based on an assessment of the profitability of the Firm, an individual’s performance and their contribution to the business carried on by the Firm.

Overall remuneration includes a profit allocation which is determined by the Remuneration Committee, reflecting individual performance as well as the Firm’s overall performance.

Quantitative remuneration data

The aggregate Remuneration for staff assessed as Code Staff by virtue of them having a material impact on the risk profile of the Firm for the performance year to 31 December 2014, was £50,000. This was for a part year and includes both fixed and variable elements of remuneration. Due to the size and complexity of the Firm, the aggregate quantitative information on remuneration, broken down by business area and the aggregate quantitative information, broken down by senior management and members of staff whose actions have material impact on the risk of the firm is the same

Contacts

For further information regarding the Firm’s Pillar 3 disclosures please contact the Compliance Officer at info@mariana-ip.com.