BOYER ALLAN INVESTMENT MANGEMENT LLP
Pillar 3 disclosure
Disclosure Policy
The Pillar 3 rules in BIPRU 11 set out the need for firms to have a formal disclosure policy. In accordance with the rules of the Financial Services Authority ("FSA") Boyer Allan Investment Management LLP (the "Firm") will disclose the information set out in BIPRU 11 (the Pillar 3 rule) on at least an annual basis. The Pillar 3 disclosure will be made in the firms annual accounts. Where a Pillar 3 disclosure is not made by way of annual accounts or the Firm's website, details of how to obtain the Pillar 3 disclosure shall be made in the annual accounts / the Firm's website and contact details for the Compliance Officer.
The Firm may omit information it deems as immaterial, in accordance with the rules. 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. Accordingly where the Firm has considered an item to be immaterial it has not been disclosed.
In addition, if the required information is deemed to be proprietary or confidential then the Firm may take the decision to exclude it from the disclosure. In the Firm's view, proprietary information is that which, if it were shared, would undermine its competitive position. Information is considered to be confidential where there are obligations binding the Firm to confidentiality with our customers, suppliers or counterparties. Where information is omitted for either of these reasons this is stated in the relevant section of the disclosure, along with the jurisdiction.
Introduction
The Firm is authorised and regulated by the FSA and as such is subject to minimum regulatory capital requirements. The Firm is categorised by the FSA, for capital purposes, as a BIPRU Firm. It is an investment management firm; it has no trading book exposures. The Firm is not required to prepare consolidated reporting for prudential purposes.
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The FSA's current prudential regime can be split into three "pillars":
- Pillar 1 - prescribes the minimum capital requirements that authorised firms need to hold. This is the higher of €50k; quarter of the firms annual adjusted expenditure (the Fixed Overheads Requirement);.
- Pillar 2 - requires firms to analyse the risks to the business and then consider whether the risks are mitigated to an appropriate standard. If the firm feels that the risks are not adequately mitigated then they should allocate capital against those risk. Stress and scenario tests are conducted to ensure that the processes, strategies and systems are comprehensive and robust and that the allocation of capital is sufficient.
- Pillar 3 - requires firms to develop a set of disclosures which will allow market participants to assess key information about the Firm's underlying risks, risk management controls and capital position.
The Fixed Overheads Requirement determines the Firm's Capital Resources Requirement.
The Firm is a Limited Liability Partnership and its capital arrangements are established in its Partnership deed. Its capital is summarised as follows:
| £000's | |
| Members' capital | 1,212 |
| Revenue reserves | - |
| ------- | |
| Members' capital and other reserves | 1,212 |
| ==== |
The main features of the Firm's Capital Resources Requirement are as follows:
| Capital Item | £'000s |
|---|---|
| Tier 1 capital less innovative tier 1 capital | 1,212 |
| Total tier 2, innovative tier 1 and tier 3 capital | - |
| Deductions from tier 1 and tier 2 capital | - |
| Total capital resources, net of deductions | 1,212 |
Risk Management
Due to the size, nature, scale and complexity of the Firm, there is no independent risk management function. The Partners of the Firm determine the business strategy and risk appetite along with the risk management policies and procedures. An identification of risks to the Firm are considered and the Firm's resultant exposure is assessed after the application of both management and mitigation of these risks. Furthermore the Firm then conduct a series of stress tests and scenario analyses on these risks to determine the effect they would have on the firm.
The Firm will consider the following risks:
Business risk relates to being able to generate fee income and control costs on an ongoing basis in line with business plans. The key income drivers are the funds for which BAIM serves as investment manager, which in turn are materially impacted by investment performance.
Operational risk relates to risks to the firm when running the business, this would include the BAIM business continuity and disaster recovery solutions which are in place in order to provide for the continuance or re-establishment of operations in the event of an emergency or significant business disruption.
Liquidity risk relates to the amount of assets the firm holds in highly liquid, marketable forms that are available should unexpected cash flows lead to a liquidity problem.
Credit risk relates to the loss of a key client and in particular the risk associated with the concentration of activities with the funds managed by BAIM.
If necessary the Firm would allocate extra capital to the relevant risk, as per the Pillar 2 requirement: this has not been deemed necessary. This process is conducted at Partners meetings which are held on a six monthly basis and the relevant policies and procedures are updated where necessary.
The Partners have identified operational risk as the main area of risk to which the firm is exposed.
Operational risk is managed by a number of means, including daily oversight by the COO, weekly meetings of portfolio managers and senior staff and software programmes,
The Firm has concluded that its Tier 1 capital is sufficient to cover its Pillar 1 and Pillar 2 requirements.