Talisman Global Asset Management Limited Pillar 3 Disclosure and Policy for a MiFID portfolio manager subject to the BIPRU firm MiFID activity restriction

Introduction

Regulatory Context

The Pillar 3 disclosure of Talisman Global Asset Management Limited (“the Firm”) is set out below as required by the FCA’s “Prudential Sourcebook for Banks, Building Societies and Investment Firms” (BIPRU) specifically BIPRU 11.3.3 R. This is a requirement which stems from the UK’s CRDIII implementing Regulations which represented the European Union’s application of the Basel Capital Accord. The Firm is no longer formally subject to CRD but remain subject to the UK’s implementation Regulations of CRD III. The regulatory aim of the disclosures is to improve market discipline.

Frequency

The Firm will be making Pillar 3 disclosures annually. The disclosures will be as at the Accounting Reference Date (“ARD”).

Media and Location

The disclosure will be published on our website.

Verification

The information contained in this document has not been audited by the Firm’s external auditors, as this is not a requirement, and does not constitute any form of financial statement and must not be relied upon in making any judgement on the Firm.

Materialarity

The Firm regards information as material in disclosures if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions. If the Firm deems a certain disclosure to be immaterial, it may be omitted from this Statement.

Confidentiality

The Firm regards information as proprietary if sharing that information with the public would undermine its competitive position. Proprietary information may include information on products or systems which, if shared with competitors, would render the Firm’s investments therein less valuable. Further, the Firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the Firm to confidentiality. In the event that any such information is omitted, we shall disclose such and explain the grounds why it has not been disclosed.

Summary

The CRD requirements have three pillars. Pillar 1 deals with minimum capital requirements; Pillar 2 deals with Internal Capital Adequacy Assessment Process (“ICAAP”) undertaken by a firm and the Supervisory Review and Evaluation Process through which the Firm and Regulator satisfy themselves on the adequacy of capital held by the Firm in relation to the risks it faces and; Pillar 3 which deals with public disclosure of risk management policies, capital resources and capital requirements.

The Firm is a portfolio management company authorised under MIFID. It acts solely as agent, so the main protection to our customers is provided through client money arrangements. The Firm’s greatest risks have been identified as business and operational risk. The Firm is required to disclose its risk management objectives and policies for each separate category of risk which include the strategies and processes to manage those risks; the structure and organisation of the relevant risk management function or other appropriate arrangement; the scope and nature of risk reporting and measurement systems; and the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants.

The Firm has assessed business and operational risks in its ICAAP and set out appropriate actions to manage them.

A number of key operations are outsourced by our clients, typically the Funds we provide Investment Management services to, to third party providers such as administrators reducing our exposure to operational risk. The Firm has an operational risk framework (described below) in place to mitigate operational risk. The Firm’s main exposure to credit risk is the risk that management and performance fees cannot be collected and, therefore, credit risk is considered low. The Firm holds all cash and performance fee balances with banks assigned high credit ratings.

Market Risk exposure has been assessed by the Firm and is limited to the Firm’s exposure to any assets held on the Firm’s Balance Sheet denominated in a foreign currency. The Firms Reporting Currency is GBP and all foreign currency assets are converted into GBP where possible on a regular basis.

Background to the Firm

Background

The Firm is incorporated in the UK and is authorised and regulated by the FCA as a MiFID Investment Management Firm and is subject to the BIPRU firm MiFID activity restrictions. Restrictions as follows:

A MiFID investment firm subject to the BIPRU firm MiFID activity restriction:

  • Is not allowed to hold client money or assets and to provide the ancillary service of safekeeping and administration of financial instruments for the account of clients;
  • Is not authorised to deal on own account, underwrite issues of financial instruments on a firm commitment basis or place instruments without a firm commitment basis, and operate a multilateral trading facility;
  • Is authorised to provide execution and portfolio management services and may be authorised to provide reception and transmissions of orders and investment advice.

The following entities are covered by the ICAAP:

  • Talisman Global Asset Management Limited

The Firm is a Solo regulated entity.

Risk Management Objectives and Policies

Risk Management Objective

The Firm has a risk management objective to develop systems and controls to mitigate risk to within its risk appetite.

Governance Framework

The Board of Directors is the ultimate Governing Body of the Firm and has the daily management and oversight responsibility. It meets on a regular basis throughout the year and formally on an annual basis. The Investment Committee meets on a monthly basis and consists of:

  • The Board of Directors
  • Chief Investment Officer
  • Chief Operating Officer
  • Senior members of the Investment Team

The Board of Directors is ultimately responsible for the entire process of risk management, as well as forming its own opinion on the effectiveness of the process. In addition, the Governing Body decides the Firm’s risk appetite or tolerance for risk and ensures that the Firm has implemented an effective, ongoing process to identify risks, to measure its potential impact and then to ensure that such risks are actively managed. Senior Management is accountable to the Executive Committee for designing, implementing and monitoring the process of risk management and implementing it into the day-to-day business activities of the Firm.

Risk Framework

Risk within the Firm is managed by use of the following:

  • The Firm has a conservative approach to risk;
  • The Firm has identified its risks and recorded them in a ‘Risk Register’;
  • The ‘Risk Register’ is reviewed at regular meetings of the executive committee
  • The Firm has undertaken scenario Analysis and Stress Tests on the most significant risks identified. This informs the Firm how risk are likely to behave and what, if any, impact there is likely to be to our balance sheet;
  • The Firm has in place an internal control framework to govern its processes and procedures and to mitigate any risks;

The specific types of risks faced by the Firm

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed Internal processes whether due to people and systems or from external events. The Firm seeks to minimise operational risk through a controls framework, particularly when engaging in new business ventures or trading new products. The Firm considers risks which may impact the Firm directly or indirectly. The most significant operational risks facing the Firm would most likely be a catastrophic systems failure and unexpected losses due to malfunctioning market and liquidity controls.

Credit risk

The Firm is not exposed to credit risk other than in respect of fees receivable and cash held on deposit at large international credit and regulated institutions. The majority of Fees received by the Firm are Fees calculated quarterly by an external administrator based on quarter end funds under management specific to funds managed by the Firm and in accordance with the individual funds Offering Memorandum. Most fees and commissions are received by the Firm quarterly in arrears. Consequently the Firm has credit exposures in respect of which it uses the simplified standardised approach when calculating risk weighted exposures, in accordance with the provisions of BIPRU 3.5. The Firm’s credit risk weighted exposure amount at 30 April 2022 was £2,121,037.

Market risk

Market risk is the risk that changes in market prices, including interest rates, foreign exchange rates and equity prices will affect the Firm’s income or the value of its holdings of financial instruments. The majority of the Firm’s market risk relates to interest rates due to the fact that all excess funds are placed on deposit at large institutions. The Firm calculates its foreign exchange risk by reference to the provisions of BIPRU 7.5. Foreign exchange risk is not considered to be material for the purposes of this disclosure. The Firm’s market risk requirement at 30 April 2022 was £880,392.

Capital Resources

Tier 1 Capital comprises of shares capital and Audited Reserves. As at 30 April 2022 it was as follows:

Tier 1
Share capital £ 350,000
Audited reserves £ 12,390,164
Total capital £ 13,280,164

Remuneration

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