This page contains the MIFIDPRU & FCA Remuneration Code Disclosures for EQ Investors Limited.
Purpose: This page sets out EQ Investors Ltd’s (“EQIL”) public disclosures in relation to Governance Arrangements, Own Funds and Own Funds Requirements as required under MIFIDPRU as at 30 April 2024.
Background: The Investment Firms Prudential Regime (IFPR) came into effect on the 1st of January 2022 as a new regime for UK firms authorised under the Markets in Financial Instruments Directive (MiFID). The IFPR was implemented by the FCA as prudential regulation within “MIFIDPRU”, which seeks to address the potential harm posed by investment firms to their clients and the markets they operate in. MIFIDPRU disclosure requirements improve transparency for market participants into how firms are run.
The disclosures in this document relate to EQ Investors Ltd, a wholly owned subsidiary with ultimate parent entity EQ Investors Group Ltd. EQIL is a non-SNI MIFIDPRU Investment firm, incorporated in England and authorised by the FCA.
EQIL is required to disclose on an individual entity basis and these disclosures have been prepared in line with the requirements described in MIFIDPRU 8 which limit the firm’s requirements to Risk management, Governance, Own Funds and Own Funds Requirements. These disclosures are published on at least an annual basis in line with the annual publication of EQIL’s audited financial statements, with reference point of 30th April 2024.
Revised disclosures will be published should significant changes occur to EQIL’s business model. None of the disclosures have been audited and they have been produced solely for the purposes of satisfying the MIFIDPRU requirements. These disclosures are published on the EQ Investors Ltd website.
1. Risk management process
EQ solely acts as an adviser and/or discretionary investment manager for clients. We do not hold clients’ money and do not act as a Principal for any Appointed Representative firms. Like any similar business it is exposed to operational and reputational risk as well as strategic & business risk. EQ adopts a proportionate approach in assessing, quantifying and analysing the risks.
The Risk Committee meets bi-annually to review the risk register and identify the more significant business risks. There are monthly meetings of the Senior Management Team and quarterly management meetings of the full Board which review and monitor financial performance of the business against business plans, compliance & operations reports. The Board have significant expertise in the industry.
Reputational risk is mitigated by:
Detailed financial plans are prepared for 12-month periods to identify key business sensitivities and manage the cost base of the business to ensure flexibility to respond to any change in circumstances. The firm’s business model and strategy is closely aligned to its moderate risk appetite.
2. Governance arrangements
The EQIL Board is the management body responsible for defining, overseeing and implementing governance arrangements within EQIL. The EQIL Board meets at least four times per calendar year. The EQIL Board is responsible for supervising the effective and prudent management of the business and affairs of the firm and for ensuring the firm has a robust corporate governance structure with well-defined, transparent and consistent lines of accountability. This includes oversight of the firm’s risk framework and internal controls. It also includes segregation of duties within the business and the identification and management of conflicts of interest.
The EQIL Board acts in the best interests of the firm and in a way to promote the integrity of the market and the interests of clients. The EQIL Board is directly accountable to the Board of the holding company but must also consider the interests of its customers, employees and other stakeholders.
EQIL does have a separate Risk Committee which includes members of the broader management team to review and approve the significant risk management policies and associated risk management frameworks.
a. Directorships
EQIL can confirm that no members of the EQIL Board currently hold any directorships which should be disclosed under the requirements of MIFIDPRU chapter 8. Furthermore, no modifications or waivers have been required to be granted by the FCA in order to allow any EQIL Board member to hold additional directorships.
b. Diversity
In reviewing its composition, the EQIL Board consider the benefits of having a broad range of views, experiences, skills, backgrounds and values represented. To support this, the EQIL Board will, when identifying candidates for appointment:
All appointments are made on merit, judged against a set of objective criteria with regard to the requirement for diversity on the EQIL Board.
3. EQIL’s Own Funds
EQIL’s regulatory capital consists entirely of shareholders’ funds which is classified as equity, which is Common Equity Tier1 capital, the highest form of Tier1 capital.
The following table in compliance with MIFIDPRU disclosure requirements discloses a reconciliation of own funds to the capital in the balance sheet as per the audited financial statements of the firm based on EQIL’s Report and Financial Statements as at 30th April 2024.
a. Own Funds: reconciliation of regulatory own funds to balance sheet in the audited financial statements.
| Balance sheet in audited/published financial statements | On a regulatory basis | Notes | |
| at period end | at period end | ||
| £ 000’s | £ 000’s | ||
| Fixed assets | |||
| Intangible assets | 165 | 0 | Deduct Intangible assets |
| Tangible assets | 31 | 31 | |
| Current assets | |||
| Debtors: amounts due within 1 year | 1,191 | 1,191 | |
| Cash at bank | 2,966 | 2,966 | |
| Creditors: amounts due within 1 year | (1,191) | (1,191) | |
| Net Assets | 3,162 | 2,997 | |
| Capital and Reserves | |||
| Tier 1 called up share capital | 1,350 | 1,350 | |
| Tier 1 audited retained profits | 1,812 | 1,647 | |
| 3,162 | 2,571 |
b. Own funds requirements
EQIL’s Pillar 1 capital requirement is calculated as the higher of:
◼(a)permanent minimum capital requirement of £75,000;
◼(b)total K-Factor requirement; and
◼(c)the fixed overheads requirement.
| Own funds requirement as at 30th April 2024 | |
| £000’s | |
| Permanent minimum capital requirement | 75 |
| K-AUM | 357 |
| Sum of all other K-Factors | 0 |
| Total K-Factor requirement | 357 |
| Fixed overhead requirement | 1,896 |
| Own funds requirement as at 30th April 2023 | 1,896 |
As at 30th April 2024, EQIL’s Fixed Overhead Requirement of £1,896,000 establishes its Pillar1 capital requirement, being higher than the base capital requirement and the total K-Factor requirement.
Meeting the Overall Financial Adequacy Rule (“OFAR”)
Under IFPR, EQIL is required to assess own funds and liquidity requirements set out in the Internal Capital Adequacy and Risk Assessment process (“ICARA”) and ensure sufficient own funds and liquidity resources are held at all times to meet the OFAR.
As part of the ICARA process the adequacy of capital to support current and future activities is monitored to ensure that EQIL has adequate capital and liquidity to enable it to manage risks not deemed to be adequately covered under the Pillar 1 minimum requirements. This is a forward-looking exercise with the level of capital and liquidity required by EQIL being assessed through reviewing a number of scenarios, as determined by the EQIL Board, and comparing them with the best case scenario of our budgeted business plan. This approach identifies the time scale and extent of possible capital and liquidity deficiencies should an adverse scenario arise. The additional level of capital and liquidity required to cover EQIL against such a scenario can then be assessed and/or the mitigating actions identified which are required to ensure a continued capital and liquidity surplus. In addition, EQIL must ensure that it has adequate own funds and liquid assets so that its business can be wound down in an orderly manner, minimising harm to consumers or to other market participants. The ICARA will be updated annually and is formally reviewed, challenged and approved by the EQIL Board on an annual basis, or more frequently if fundamental changes to the business require it. The ICARA was last approved by the board on 29/06/2024.
4. Remuneration policy
Introduction
The Capital Requirements Directive (CRD) of the European Union and the MIFIDPru Remuneration Code[1] (the ‘Code’) require regulated investment firms to establish and maintain remuneration policies, procedures and practices that are consistent with and promote sound and effective risk management.
Firms are also required to report annually on their remuneration policy for employees termed material risk takers (MRTs). MRTs 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 the firm’s remuneration is determined
The Boards review remuneration annually for all staff. Basic salaries are reviewed in line with individual performance and agreed by the Remuneration Committee. Bonuses and pension contributions as a percentage of earnings are discretionary and agreed by the Remuneration Committee linked to the firm’s overall financial position.
Quantitative disclosure
In the year ended 30th April 2024, the Firm defined its material risk takers including the Board, Head of IT, Head of Compliance and Investment Managers. The aggregate annual remuneration for Code Staff for the year was £1,712,494.
[1] MIFIDPRU 8.6 Remuneration policy and practices – FCA Handbook
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