Public Disclosures

INTRODUCTION

 

Henry Spain Investment Services Limited “HSIS” is a private client wealth management firm, authorised and regulated in the United Kingdom by the Financial Conduct Authority (‘FCA’). As such, HSIS has to comply with the Prudential sourcebook for MiFID Investment Firms, Prudential Sourcebook for Investment Firms (MIFIDPRU) and the Investment Firms Prudential Regime (IFPR). HSIS is a SNI firm that has a permanent minimum capital requirement of £75,000. HSIS is a stand-alone company and there is no UK Consolidation Group for UK regulatory purposes.

The rules set out the need for firms to publish certain details of their risks, capital and risk management in order to improve transparency and market discipline. The information is available upon request. The disclosures will be updated each year after completion of the annual audit and approval of the audited financial statements. HSIS’s year end is 31 December.

CAPITAL RESOURCES

 

The FCA’s prudential regime requires firms to consider two or three elements. The first two apply to all firms, the third only to what are called non-Small and non-Interconnected firms. HSIS is an SNI firm.

• Permanent Minimum Requirement – this prescribes the minimum capital requirements that the company needs to hold and is £75,000 for HSIS.
• Fixed Overheads – this requires firms to consider the costs of running the business for a period of three months and establish which costs could not be reduced in the short term.

In identifying these two numbers firms under the regime carry out an Internal Capital And Risk Assessment (ICARA). This enables the firm to consider whether additional capital should be allocated to the higher of those numbers through an analysis of the risks to the business and then consider whether the impact of risks are mitigated to an appropriate standard. If the company considers that the risks are not adequately mitigated then it will allocate additional capital to cover those risks.

Public disclosure – this requires firms to develop a set of disclosures which allow market participants to assess key information about the company’s risks, controls and capital position.

Annually, the Board formally review the firm’s risks, controls and other risk mitigation arrangements and assess their effectiveness. Where material risks are identified the company will model the financial impact of these risks as part of its business planning and capital management and conclude whether the amount of regulatory capital is adequate.

RISK MANAGEMENT POLICIES AND OBJECTIVES

Our interpretation of risk appetite is how comfortable would we be if a risk were to emerge. This is quite a subjective analysis, however, it does gauge how the Board is feeling about the risks within our firm.

The current view is that the Board are relatively comfortable with the key risks potentially affecting the Firm, but we will keep this in view on an ongoing basis.

The Board will review the overall effectiveness and relevance of the Firm’s system and controls for each financial year. The Board will also carry out an evaluation of the major risks affecting the business and the processes in place within the business to control and monitor such risks on an ongoing basis. On this basis the Board will report and disclose its findings and whether it believes that all necessary actions have been, or are being, taken to remedy any significant failings identified as part of the ongoing risk management process and that no significant weaknesses were identified during the year.

The Firm’s activities are non-complex and the Firm does not hold client money or client assets.

In order to ensure that the Henry Spain Investment Services Limited regularly reviews and monitors all the potential areas of risk to the business, the Firm has put in place a risk management framework which enables all senior management and any relevant committee and the Board to be kept fully informed of any potential risks to the business and also how those risks might impact the group’s capital adequacy position.

A Risk Matrix has been designed which captures the core fundamental risks inherent in the firm and assesses how those risks are managed and mitigated, the key indicators that would suggest if the risk is likely to materialise together with an assessment that each risk may have on the Firms regulatory capital.

A thorough Compliance Monitoring Programme (“CMP”) is managed via an annual programme of reviews. Details of the CMP and the current status are provided to the Board on a regular basis, with any material issues being escalated to the Board immediately they are identified.

The CMP also includes undertaking stress and scenario testing of its key risks to determine the impact to our current and future profitability and balance sheet.

The key risk exposures the Firm faces and the mitigating controls in place are listed below:

Credit Risk

The value of the assets that we manage or advise upon could reduce for a variety of reasons, including the loss of clients and a reduction in the value of a clients’ portfolio either due to market movements or poor portfolio performance. The highest potential risks are:

Loss of Clients – The firm has a diverse client base for our discretionary managed clients. Client relationship management and retention is at the very centre of operations. Should a client be deemed to be ‘at risk’ a formal action plan would be managed to prevent the loss of the client.

Poor relative performance is monitored and reported on an ongoing basis. Should the performance be such that either we or the clients were unhappy with portfolio performance, we would instigate a formal action plan.

Operational Risk

The risk resulting from inadequate or failed business processes and systems. Henry Spain Investment Services seeks to monitor potential sources of errors arising from its operations and continually strengthen our internal systems and processes, supervisory and oversight functions to reduce our residual risk exposure. The Firm maintains resilient infrastructure, and regularly tests its Business Continuity and Disaster Recovery arrangements to limit the impact of potential external events. Additionally, the Firm maintains comprehensive Professional Indemnity Insurance cover to cap our exposure to potential large claims or operational losses.

There are two registered investment managers, who act as a contingency for each other. The Chief Investment Officer maintains a buy list with target prices for all holdings and potential holdings, to assist with any transitional phase, should that be required.

Liquidity Risk & Market Risk

Reduction in Portfolio Values – The two principal reasons for a reduction in the value of a clients’ portfolio, would either be adverse market movements or poor relative investment performance. We have modelled the impact of a downturn in the markets, which has demonstrated we have sufficient liquidity.

The key liquidity requirements within the firm are the cashflows within the business and how a non-receipt of funds may significantly impact the firm.

At present the firm is not materially reliant on any one client for income (materiality is defined as any exposure to one client which may impact by the balance sheet by more than 10%).

Business Risk

The firm has undertaken an analysis of how a significant increase, or decrease, in business volumes may impact the firm. We are confident in either scenario of increase or decreasing client numbers we have enough resources to maintain our ongoing service.                              

The directors have discounted areas of risk which are not considered to be material, and have calculated that the fixed overhead is at a higher amount than the base requirement. The conclusions from the ICARA are that no additional capital is required.

As at 31 December 2022, HSIS had total capital resources of £420,182 and a fixed overheads requirement of £207,609. As a result, HSIS has a capital resource surplus, as at that date, of £212,572.

REMUNERATION POLICY

 

Henry Spain Investment Services Ltd. is subject to the BIPRU Remuneration Code. This section provides further information on our remuneration policy.

Henry Spain Investment Services Ltd. has a Remuneration Committee which is responsible for the remuneration policy.  The Remuneration Committee ensures that remuneration does not encourage undue risk taking, and reviews compensation against competitors giving regard to relevant legal and regulatory requirements under the BIPRU Remuneration Code.

Salaries have an element of variable pay for all staff which is based on firm wide profitability and individual adherence to company culture. The variable pay differs between employees depending on the individual’s KPI’s according to their role and experience. Variable pay does not incentivise staff to favour their own interest to the detriment of the client.

The FCA rules require certain firms to disclose aggregate information on remuneration in respect of its BIPRU Remuneration Code Staff broken down by business area, senior management and other Code Staff, including “risk takers”.

Henry Spain Investments Ltd. focuses on investment management and financial planning, and it is run by one Director. The firm has assessed that there are no “risk takers” and the Director is responsible for all management and supervision, and therefore, there are no other Senior Managers to be included within the remuneration code.

Director remuneration is agreed formally at board meetings. The link between performance and pay is inevitable in a small firm, but the firm’s risk adverse strategy and robust risk management systems mitigate those risks.

Code Staff

FCA BIPRU Remuneration Code staff comprises categories of staff including senior management, risk-takers, staff engaged in control functions and any employee receiving total remuneration that takes them into the same remuneration bracket as senior management and risk-takers, whose professional activities have a material impact on the firm’s risk profile.

In line with the requirements of the Code, Henry Spain Investment Services Limited has identified the key individuals in the firm who act either as senior managers, risk takers or control functions. These individuals are nominated “Code Staff”. There is only one individual designated as code staff and this is currently Tom Spain the Director of the Business.