IMPORTANT INFORMATION

PILLAR 3 DISCLOSURES 31 MARCH 2016

1. Capital Resources

Introduction

The Capital Requirements Directive (CRD) of the European Union establishes the regulatory capital framework with which FCA regulated investment firms must comply, and sets out the amount and nature of capital they must maintain.

The FCA framework consists of three “pillars”:

  • Pillar 1 sets out the minimum capital firms must maintain to cover its credit, market and operational risks;
  • Pillar 2 requires firms to assess any firm-specific risks not covered by Pillar 1 and, if necessary, set additional capital aside to mitigate them.
  • Pillar 3 requires the public disclosure of key information relating to the firm’s risk management controls and capital resources, for use by the market.

This document is designed to fulfil RCBIM’s Pillar 3 requirement and is published annually on our website www.rcbim.co.uk.

Scope & Application of the Requirements

RCBIM is a discretionary investment management firm with permission to hold and control client money, and is authorised and regulated by the FCA. It is categorised as a IFPRU Limited Licence €125k firm for capital purposes.

Risk Appetite and Management

Risk appetite is the level of risk RCBIM is prepared to accept without applying further resources (financial or otherwise) to mitigate it.

The Board of RCBIM determines the firm’s business strategy and risk appetite and meets monthly to consider financial and operational issues, thus enabling the directors and senior management to play an integral part in the early identification and successful management of risk.

The Board prepares, at least annually, an internal Capital Adequacy Assessment Process (ICAAP) which identifies and analyses the material risks faced by the firm and the controls in place to mitigate them.

RCBIM has identified the following risks to its business:

  • Credit risk
  • Market risk and loss of income
  • Legal and Operational risk
  • Regulatory Risk
  • Loss of key personnel
  • Business Interruption
  • Remuneration risk
  • Under performance and loss of clients

A “probability versus impact” assessment is carried out to arrive at a suitable level of capital to be held in mitigation (Pillar 2). The risks are then “stress-tested” against various scenarios to determine if even more capital is required

The Board has adopted a conservative approach to risk, which is achieved in the following ways:

  • The firm’s simple business structure and service offering;
  • The appointment of experienced and independent senior managers to the controls and oversight functions within the firm;
  • Limited exposure to credit risk;
  • Regular investment strategy meetings;
  • A comprehensive compliance monitoring programme;
  • An appropriate range of insurance policies;
  • The retention of expert external advisers.

Capital Requirements and Resources

RCBIM’s Capital Requirement is the total of its Pillar 1 and Pillar 2 capital.

Pillar 1 capital is the greater of:

  • The base capital requirements of €125,000
  • The sum of the market and credit risk requirements
  • The Fixed Overheads Requirement (FOR)

Pillar 2 capital is the amount calculated by the firm within its ICAAP as necessary to cover any risks not covered by Pillar 1.

As RCBIM has a low exposure to credit, market and operational risk, and no Pillar 2 capital is currently required, its capital requirement is equal to the FOR.

RCBIM’s Capital Resource comprises Tier 1 capital with no deductions. Tier 1 capital consists of called up share capital, reserves and profit and loss, and is regarded by the FCA as the core measurement of a firm’s financial strength.

RCBIM’s capital position as at 31 March 2016 was as follows:

£000
Pillar 1 requirement 260
Pillar 2 requirement 000
Tier 1 capital 805
Surplus 555
Solvency ratio 313%

 

2. Remuneration

Introduction

The Capital Requirements Directive (CRD) of the European Union and the FCA Code on Remuneration require regulated investment firms to establish and maintain remuneration policies, procedures and practices that are consistent with and promote sound and effective risk management. The Code also requires firms to report annually on their remuneration policy for employees termed Code Staff. Code Staff can generally be defined as employees who perform a significant influence function, senior management and other staff who have a material impact on the risk profile of the business.

How RCBIM’s remuneration is determined

The Board of RCBIM reviews remuneration annually for all staff. Basic salaries are reviewed in line with individual performance. Bonuses and pension contributions are discretionary and linked directly to the firm’s overall financial position but will not exceed the ratio between fixed and variable components as specified in the Regulations.

RCBIM have set the ratio between the fixed and variable components of total remuneration to ensure that the total remuneration to the fixed component does not exceed 1:1. RCBIM may on occasion exceed the 1:1 ratio providing that it is approved by the shareholders or owners of the firm and in any case does not exceed a ratio of 1:2.

Quantitative Disclosure

In the year ended 31 March 2016 RCBIM defined its Code Staff as its Board of Directors plus one other senior manager. The aggregate annual remuneration for Code Staff for the year was £276,000.

POLICIES

Complaints

In the first instance all complaints must be addressed to the Compliance Director at the firm's registered address (a copy of our complaints procedure is available upon request). In certain circumstances, and subject to specific timeframes, if you are unhappy with our final response, or eight weeks have passed since we received the compliant you may refer your complaint to the Financial Ombudsman Service. For more information, please refer to the Financial Ombudsman Service, Exchange Tower, London E14 9SR. Tel. 0845 080 1800. Web: www.financial-ombudsman.org.uk.

Best Execution for Transferable Securities

Our execution policy is applicable to all clients and categories of business conducted by RC Brown Investment Management PLC. When executing orders on your behalf RCBIM must take all reasonable steps to obtain the best possible result. This means that we must have procedures in place which are designed to obtain the most favourable terms available in as many instances as possible, taking into account the nature of the order and the type of security being traded.

Our policy in providing you with best execution is to apply the same standards and procedures to all the securities which make up your portfolio, all of which are traded on the main European and London stock exchanges (including AIM). We will take into account a number of different factors when deciding how to achieve best execution, of which price will usually merit the highest importance. However in certain circumstances RCBIM may decide that other factors should be taken into account, such as:

a) the size of the order,

b) the liquidity of the market,

c) the overall cost of the transaction,

d) the speed of execution,

e) the certainty of settlement,

f) the combined effect of any of the above.

For example, when placing an order in a security with low liquidity, the fact of execution itself

may constitute a satisfactory result. Conversely, price volatility may mean that the timeliness of execution is a priority. RCBIM retains absolute control over the price at which its orders are executed and does not delegate investment decisions to any other firm.

On the rare occasions that RCBIM receives specific instructions from you in relation to an order, these will be taken into account. Where they differ from our stated policy we will be deemed to have met our obligation to you by executing your order in the manner in which you have instructed, however this may result in best execution not being achieved.

In the absence of express instructions we will exercise our discretion in determining the factors which we need to take into account, and the priority afforded to each, having regard to the criteria listed above.

RCBIM places its orders for execution with third party stockbrokers. As these firms are subject to the same regulatory framework as RCBIM we are entitled to rely to some extent on their own Order Execution policies and procedures. Wherever possible we select firms who will undertake a contractual obligation to provide us with best execution, in which case we may place a high degree of reliance on their arrangements.

In some circumstances a better result may be obtained from firms who offer no such contractual obligation. In these cases RCBIM will only select firms who can demonstrate a high quality track record for the type of order which we are likely to transmit, in order to satisfy ourselves that we

can meet our obligations to you. RCBIM uses a range of firms, which is reviewed at least annually and may vary, which we believe offers optimum access to acquisitions via the wholesale market and excellent prospects of best execution when executing orders on your behalf. Orders are allocated individually to the broker with the best access to liquidity, competitive pricing and efficient execution of the stock.

In seeking to achieve Best Execution the brokers through whom we deal may place a transaction on your behalf outside a regulated market or multilateral trading facility. We have given our consent to this course of action as failure to do so may result in a broker declining to deal, or charging you more for their services.

RCBIM will monitor the effectiveness of its execution policy and arrangements to identify and, where necessary, correct any deficiencies. We will assess on a regular basis whether the third parties included in our order execution policy continue to provide the best possible results or whether we need to make changes to our chosen arrangements. These reviews will take place annually or whenever a change occurs which materially affects our ability to meet our obligations to you.

While we will take all reasonable steps based on the resources available to us to deliver the best results, we cannot guarantee that we will be able to provide best execution on every order executed on your behalf.

How RCBIM’s remuneration is determined

The Board of RCBIM reviews remuneration annually for all staff. Basic salaries are reviewed in line with individual performance. Bonuses and pension contributions are discretionary and linked directly to the firm’s overall financial position but will not exceed the ratio between fixed and variable components as specified in the Regulations.

RCBIM have set the ratio between the fixed and variable components of total remuneration to ensure that the total remuneration to the fixed component does not exceed 1:1. RCBIM may on occasion exceed the 1:1 ratio providing that it is approved by the shareholders or owners of the firm and in any case does not exceed a ratio of 1:2.

USE OF COOKIES BY RCBIM PLC

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RISK DISCLAIMER

This website and any downloadable content may not be suitable for all recipients and does not constitute a personal recommendation to invest. If you have any doubts as to the suitability of this service, you should seek advice from your investment adviser. The past is not necessarily a guide to future performance. The value of shares and the income from them can fall as well as rise and investors may get back less than they originally invested. Any tax reliefs referred to are those currently applying.

All estimates and prospective figures quoted in this publication are forecasts and are not guaranteed. RCBIM, its associate companies and/or their clients, directors and employees may own or have a position in the securities mentioned herein and may add to or dispose of any such securities.