PK Wealth Limited (the Company) is incorporated in the UK and is authorised and regulated by the Financial Conduct Authority (FCA). As such, the Company has to comply with the Prudential Sourcebook for Investment Firms (IFPRU) and the Capital Requirements Regulation (CRR). The Company is a limited licence firm that has a base capital requirement of €50,000. Whilst the company is a subsidiary of PK Group Ventures Ltd there is no UK Consolidation Group for UK regulatory purposes.
The Pillar 3 rules in the CRR 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 Company makes the Pillar 3 disclosures available on its website, www.pkgroup.co.uk , and the information is also available from the Company Secretary on request. The disclosures will be updated each year after completion of the annual audit and approval of the audited financial statements. The Company year end is 31 March.
The Company may omit information it deems immaterial. Materiality is based on the criterion that omission or misstatement would be likely to change or influence the decision of a person relying on that information. Accordingly where the Company has considered an item to be immaterial it has not been disclosed. In addition, if the required information is deemed to be proprietary or confidential then the Company may take the decision to exclude it from the disclosure. It defines proprietary information as that which, if shared, would undermine its competitive position. It defines information as confidential where there are obligations binding it to confidentiality with customers, suppliers or counterparties. If information is omitted for either of these reasons this will be clearly stated. The information in this document has not been audited by the Company’s external auditors.
The FCA’s prudential regime is split into 3 Pillars as follows:
- Pillar 1 – this prescribes the minimum capital requirements that the Company needs to hold and is the highest of €50,000; the sum of its market and credit risk requirements; and its fixed overhead requirement
- Pillar 2 – this requires firms to analyse the risks to the business and then consider whether the risks are mitigated to an appropriate standard. This is part of the Internal Capital Adequacy Assessment Process (ICAAP). If the Company considers that the risks are not adequately mitigated then it will allocate additional capital to cover those risks.
- Pillar 3 – 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.
Strategic risk – includes the risk of financial loss due to the failure to anticipate the changing business and economic climate in the provision of services to our clients. It also includes risks arising from the way we conduct our business, i.e. regulatory risk. The senior management monitor and review the business to minimise the impact of such risks.
Financial risk – includes the effects of market risk, credit risk and liquidity risk. These arise from having income dependent on the valuation of the underlying client portfolios being managed, from the impact of interest rates and other factors leading to creditors not paying and from the management of short term cash flows. The impact of movements in the stock market valuations and movements in interest rates as well as cash flow are carefully monitored by management to assess the impact on the business and determine appropriate actions.
Operational risk – covers our assessment of the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Company has procedures in place to check and monitor the processes to minimise these risks.
The directors have discounted areas of risk which are not considered to be material, such as market and credit risk, and have calculated that the fixed overhead is at a lower amount than the base requirement. The conclusions from the ICAAP are that no additional capital is required.
As at 31 March 2020, the company had total capital resources of £123,315 and a fixed overheads requirement of £73,000. As a result, the company has a capital resource surplus, as at that date, of £50,135.
The company is a proportionality level 3 firm for the purposes of the FCA’s Remuneration Code. All staff receive a fixed salary paid monthly and may be awarded a discretionary bonus, dependent on the overall profitability of the Company. An individual’s share of the bonus pool is dependent on a number of factors including responsibilities, contribution to the Company and length of service. The company also has discretion to grant share options. The Board reviews the level of salaries and considers any discretionary awards annually. The total remuneration cost for the year of staff within the scope of the Remuneration Code was £260,661.
Pillar 3 Disclosures: June 2020