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020 7907 8777    info@thompsontaraz.co.uk

Policies and Terms

Legal and Regulatory Information

REGULATED STATUS OF ENTITIES

Thompson Taraz LLP is regulated to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001105656. Thompson Taraz LLP is a limited liability partnership registered in England and Wales under number OC307438.

Thompson Taraz Managers Limited (“TTML”) and Thompson Taraz Depositary Limited (“TTDL”) are authorised and regulated by the Financial Conduct Authority (“FCA”). Their firm reference numbers are 226978 and 465415, respectively.
The registered office of all three entities is 4th Floor, Stanhope House, 47 Park Lane, London, W1K 1PR.

Thompson Taraz Managers Limited and Thompson Taraz Depositary Limited are covered by both the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS).

Eligible complainants may raise a complaint with the FOS if they are not satisfied with the firm's handling of their complaint. The FOS may be contacted at:

The Financial Ombudsman Service
Exchange Tower
London E14 9SR
www.financial-ombudsman.co.uk
 
In the event of the firm’s failure, eligible claimants may be able to seek compensation from the FSCS.  The FSCS may be contacted at:

Financial Services Compensation Scheme
10th Floor
Beaufort House, 15 St Botolph Street
London EC3A 7QU
www.fscs.org.uk
 

PILLAR 3 DISCLOSURES

1. Background

Thompson Taraz Depositary Limited ("TTDL") and Thompson Taraz Managers Limited ("TTML") operate under the Basel II capital adequacy framework. This consists of three “pillars”:

• Pillar 1 is a formal set of rules for calculating the minimum capital required by TTDL and TTML to cover potential losses arising from credit, market and operational risks.

• Pillar 2 focuses on TTDL and TTML’s internal capital adequacy assessment and this covers other risks (such as business risk) as well as the three risk types covered by Pillar 1.

• Pillar 3 aims to encourage market discipline through the public disclosure of TTDL and TTML’s risk and capital profile. The information disclosed includes qualitative information (about TTDL and TTML’s risk governance and risk and capital management processes) and quantitative information (about its risk exposures and capital). The quantitative disclosures provide data on the calculation of risk and capital resources and requirements as set out in Pillar 1.

The UK Financial Conduct Authority ("FCA") supervises TTDL and TTML and has set out its Pillar 3 requirements within its “Prudential Sourcebook for Investment Firms” (“IFPRU”). This document satisfies our obligations under those requirements- TTDL and TTML will provide its Pillar 3 disclosure annually, covering the previous financial year.

2. Location

The Pillar 3 disclosures will be published on the Thompson Taraz website.

3. Scope

TTDL and TTML form part of a group which consists also of TT Shared Services Limited. (This latter entity serves as the group’s employer and group management services provider). This group does not constitute a UK Consolidation Group and, accordingly, the disclosures set out herein are made only with respect to TTDL and TTML which are both authorised and regulated by the FCA.

TTDL’s principal business is to act as a depositary for private equity and real estate alternative investment funds. Senior management considers that this business model is sound and capable of withstanding economic stresses and downturns.

TTML’s principal business is to act as an operator and/or manager of unregulated collective investment schemes (UCIS) and investment manager for Enterprise Investment Scheme (EIS) funds.  TTML is approved as a full scope UK AIFM.

The quantitative disclosures are being made on the basis of TTDL and TTML’s audited annual financial statements for the year ended 30 April 2016. Disclosures under Pillar 3 are updated at least annually.

Due consideration has been given to the materiality of all required disclosures and to the question as to whether to withhold any of the required disclosures on the basis that they contain proprietary or confidential information.

It should be noted that these disclosures do not constitute financial statements of TTDL and TTML and should not be relied on for any purpose other than the disclosure requirements referred to above. TTDL and TTML have not and are not required to have the Pillar 3 disclosures audited by external auditors.

4. Risk management overview

The main categories of risk which require consideration are the following:

• Market and Credit risk;
• Capital and Liquidity risk;
• Operational risk;
• Regulatory and Legal risk; and
• Reputational risk.

TTDL and TTML place considerable weight on the management of exposures to risk. Its risk management policies are designed to identify, monitor, mitigate and control such exposures to ensure that the activities of TTDL and TTML are managed within the risk tolerances determined by the respective Boards of Directors (“Board”).

Risk exposures are identified, monitored and controlled by the Board. Responsibility for the approval of all risk management policies and for setting the overall risk appetite and tolerance levels rests with the Board. The core responsibilities are to:

1. Assess and report on the effectiveness of the firms’ internal control systems in managing risks;
2. Provide an appropriate level of reporting of the status of risk within the firms; and
3. Act on issues as and when they arise.

The Board meets on a regular basis and receives reports concerning the overall risk exposure covering areas such as exposures to market risk, credit risk, liquidity risk and operational risk.

TTDL and TTML have insurance designed to reduce its exposure to liability and to protect its assets. These are provided by third party insurers and aim to financially mitigate the economic consequences of risks. Any significant changes in the risk profile of TTDL and TTML are taken into account by tailoring the insurance to TTDL and TTML’s risk exposures. This approach is designed to maximise breadth of cover and certainty of response in respect of key third party liabilities, loss of assets, business interruption and people-related exposures.

6. Disclosures

Market risk

This is the risk of loss as a result of adverse market movements affecting the value of investments held by a firm.

TTDL does not have any proprietary holdings in investments and as such on a Pillar 1 basis the only market risk to which it is exposed is with respect to any non-sterling balances held. Any such balances are very minor, and are either hedged or reversed upon reception so as to eliminate any market risk.

TTML does not have any material proprietary holdings in investments, commodities, etc. It has previously held immaterial balances in a euro account but any balances would be held for a very short time and therefore the Pillar 1 market risk capital requirement would be considered sufficient. 

Credit risk

This is the risk of loss as a result of the non-payment of a debtor.

TTDL has adopted the ‘Standardised Approach’ to calculating its Pillar 1 credit risk requirement. The main credit risk for TTDL is the non-payment of fees, and cash holdings at banks.

TTDL seeks to deal only with creditworthy counterparties. Outstanding fees are monitored closely. Strict payment terms are written into engagement letters. In the case of retained clients, fees are billed quarterly. TTDL’s cash and cash equivalents are held with a range of banks which are major UK clearing banks currently supported by a government guarantee.

TTML's approach to credit risk, with respect to credit risk management and monitoring, fee arrangements and bad debt experience is similar to that of TTDL’s.  The same due diligence and creditworthiness checks for banks as for TTDL occur and the banks it uses are in common with TTDL.

Liquidity risk

This is the risk that a business will be unable to meet its financial obligations as they fall due. TTDL and TTML maintain cash resources adequate to meet its projected obligations.

Ultimate responsibility for liquidity management rests with the Board. TTDL and TTML manages liquidity risk by maintaining sufficient cash reserves to meet its actual and forecast cash flows.

Operational risk

This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.

TTDL and TTML seek to avoid, mitigate, manage or transfer operational risk in order to attain acceptable residual levels. This objective is implemented largely through the maintenance of appropriate systems, processes and controls. TTDL and TTML employ experienced staff, and maintain clear segregation of duties and clear lines of escalation appropriate to its size and activities. Relevant operational procedures are documented and staff are provided with appropriate training. Outsourced relationships, where they exist, are monitored to ensure adherence to contractual obligations. Business continuity plans are in place and are subject to regular review and testing. Operational risk is further mitigated by professional indemnity insurance.

Reputation risk

This is the risk of an event occurring which could adversely affect TTDL or TTML’s reputation. The effect could be, for instance, a loss of confidence by clients, which could in turn affect the ability to generate income.

TTDL and TTML consider a loss of reputation to be a significant risk to a business operating in the financial services sector. TTDL and TTML believe that any risk to its reputation would arise as a result of a failure to manage its other risks and therefore always endeavours to always act with integrity and places the highest importance on risk management at all levels of the organisation. It strives to demonstrate this commitment to maintaining the highest level of integrity through its culture, the dedication of senior management time and resources to ensure all employees are aware of the need to display the highest ethical standards in their day to day work and interaction with its clients, regulators and other stakeholders.

Risk appetite

The establishment of TTDL and TTML’s risk appetite and tolerance is the responsibility of the Board. In addition to the implementation of the policy set by the Board, significant new business developments and changes are subject to Board approval. The Board is provided with the relevant management information to enable it to conduct its oversight and governance responsibilities appropriately. Through the composition of the Board it has a comprehensive understanding of the risks throughout the business.

TTDL and TTML are privately owned entities in which the shareholders are employees of the entity. Consequently, the interests of the shareholders are aligned with the interests of the management and employees of the Group.

TTDL and TTML use its short lines of communication to agree new policies, procedures or business developments quickly and if necessary at short notice. Any new developments will always be made in the context of the current and future risks, cash and profits projection.
Reviews of financial cover required for potential risk are undertaken periodically.

7. Capital adequacy

Capital Resources are defined under a number of different tests including regulatory, accounting and internal economic capital criteria. Each of the different tests permits or requires certain additions or deductions, and these are summarised below:

As at 30 April 2016, TTDL had £350,000 of regulatory capital in place after deductions compared with a requirement of £169,000. This resulted in a £181,000 surplus. Details are set out below. 

  £'000  
Capital Resources

 

 

 
Tier 1 capital (fully paid ordinary share capital) 350  
Deductions from tier 1 capital

  -

 
Tier 1 capital after deductions 350  
     
Tier 2 capital   -   
Tier 3 capital   -   
Total capital after deductions 350  
     
Capital resources requirement    
Credit risk capital requirement 30  
Market risk capital requirement   -  
Fixed overheads requirement 169  
     
Total capital resources requirement 169 (being higher of the
    aforementioned or €125,000)
Surplus capital resources 181  

 

As at at 30 April 2016, TTML had £407,000 of regulatory capital in place after deductions compared with a requirement of £191,000. This resulted in a £216,000 surplus.  Details are set out below.

 

  £'000  
Capital Resources

 

 

 
Tier 1 capital (fully paid ordinary share capital) 407  
Deductions from tier 1 capital

  -

 
Tier 1 capital after deductions 407  
     
Tier 2 capital   -   
Tier 3 capital   -   
Total capital after deductions 407  
     
Capital resources requirement    
Credit risk capital requirement 82  
Market risk capital requirement   -  
Fixed overheads requirement 191  
     
Total capital resources requirement 191 (being higher of the
    aforementioned or €125,000)
Surplus capital resources 216  

 

 

8. Capital resources

TTDL and TTML are designated as an IFPRU Limited Licence firm (with a base capital requirement of €125k) and are subject to an expenditure requirement.

TTDL and TTML have undertaken an internal capital adequacy assessment process (“ICAAP”). The ICAAP was last revised in October 2015 and did not identify any risks for which additional capital is required. TTDL and TTML currently have capital resources consideration in excess of the regulatory minimum capital requirement.

 

REMUNERATION DISCLOSURE

 

The EU Capital Requirements Regulation (Regulation (EU) No 575/2013) imposes a requirement for disclosure of TTDL and TTML’s approach to linking remuneration to risk. The aim is to ensure that firms have in place remuneration policies which are both consistent with and promote effective risk management and do not expose them to excessive risk.

TTDL and TTML ("the Firms") have a remuneration policy that appropriately addresses potential conflicts of interest and aims to ensure that TTDL and TTML’s authorised persons are not rewarded for taking inappropriate levels of risk. Under the Remuneration Code (“the Code”), TTDL is classified as a Tier Three firm and TTML satisfies the necessary proportionality elements; this allows the Firms to disapply many of the technical requirements of the Code and to proportionately apply its rules and principles in establishing the Firms' policies.

TTDL and TTML are satisfied that the policies in place are appropriate to the size, internal organisation and the nature, scope and complexity of their activities.

The decision making process

TTDL and TTML do not have a formal Remuneration Committee; rather, the remuneration of TTDL and TTML’s Directors and staff are reviewed on an annual basis by the Founding Directors, who, on a day-to-day basis perform activities on behalf of the entire group and therefore are cognisant with the performance of TTDL, TTML and its staff.  Remuneration is specifically determined with reference to the performance of the individual during the year (using qualitative criteria set out in their annual appraisal) and with regard to the group's actual and projected reserves, profits and cash position.

TTDL and TTML have assessed its personnel and conclude that during the year to 30 April 2016, seven members of staff (four of whom are Founding Directors) qualified as Code Staff. As at the year end of 30 April 2016, six members of staff qualified as Code Staff (four of whom are directors of Founding Directors).

Quantitative remuneration data

The table below sets out the remuneration information required by EU Capital Requirements Regulation (Regulation (EU) no 575/2013 Article 450 1(g) and 1 (h). The firm has only one business line and, as such, a breakdown across business lines cannot be provided.

Aggregate quantitative information on remuneration, broken down by senior management and members of staff whose actions have a material impact on the risk profile of the firm* 

 

Senior Management (£)

Other members of staff (£)

Totals (£)

Fixed Remuneration

634,000

0

634,000

Variable Remuneration

0

0

0

Number of Staff

7

0

7

During the year, any variable remuneration paid was in the form of cash and was not deferred. Further, there were no guaranteed bonuses, new sign-on payments or severance payments paid.

*The aggregate disclosed remuneration relates to services performed on behalf of Thompson Taraz Depositary Limited, Thompson Taraz Managers Limited and Thompson Taraz LLP.

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