MiFIDPRU Public Disclosure Notice

Introduction

Purpose

This document sets out Axi Financial Services (UK) Ltd’s (“Axi” or the “Company”) public disclosures in relation to Governance Arrangements, Own Funds and Own Funds Requirements and Remuneration as required under MIFIDPRU.

Background

The Investment Firms Prudential Regime (IFPR) is the FCA’s new prudential regime for MiFID investment firms which aims to streamline and simplify the prudential reporting and disclosure requirements for MiFID investment firms. The IFPR came into effect on 1st January 2022 and replaces the previous framework of the Capital Requirements Directive (CRD) IV and Capital Requirements Regulation (CRR).

The Company is a wholly owned subsidiary and part of the Axi Group of companies.

Axi is a non-SNI MIFIDPRU investment firm.

Risk Management

Risk Management objectives and policy

Whilst at an operational level the Company’s risk appetite appears low as it:

• Has a focus on mature financial products.
• Fully hedges all client trades.
• Uses established technology for client interaction.

However, the reliance on the Group does expose Axi to the Group’s risk appetite, and this is considered a more appropriate reflection of risk.

The risk appetite is determined by the Group Executive, and approved by the Board and is consistent with its strategy. Risk management is one of the strategic principles:

“We exist because we take risk, but we will implement solutions and processes that will help us maximise our risk-adjusted returns.”

The risk management of the Company is overseen by:

• Primarily the Governing body supported by the client money oversight officer:
• The Group has a risk management team who oversee all Group risk including the Company’s. This includes a central repository “Assurance” for recording of incidents where procedures have not been followed, system or other failures have occurred, or the Company or clients have been exposed to unnecessary loss from the actions of the Company.

Risk management for the period is considered effective as:

• There have been no material losses to the Company or clients arising from failings in risk management.
• The Assurance register shows that any incidents identified have not been due to ineffective risk management.
• Breaches reported to the FCA in relation to client money breaches are not due to failings in risk management.
• Limits set by Risk have been adequately monitored and adhered to in the period with any breaches managed proactively.

Own funds

The table below shows the Tier 1 capital, specifically Common Equity Tier 1 (CET1) capital held by Axi. The Company does not hold any Additional Tier 1 or Tier 2 capital.

The following tables below, in compliance with MIFIDPRU disclosure requirements, disclose:

• the composition of the Company’s own funds
• a reconciliation of own funds to the capital in the balance sheet per the audited financial statements of the firm, followed by
• a description of the main features of the CET1 capital issued by the firm.

The tables are based on Axi’s Financial Statements as at 30 June 2023.

Own funds requirement

The Company is required to disclose the K-Factor requirement and the fixed overhead requirement (FOR) amounts in relation to its compliance with the own funds requirements set out in MIFIDPRU 4.3.

These amounts are shown within the table below:

As at 30 June 2023, the Company’s total K factor requirement of £6,698.000 establishes its Pillar 1 capital requirement, being higher than the permanent minimum capital requirement and FOR.

Assessing the adequacy of own funds

The Company assesses the adequacy of its own funds in accordance with the prescribed permanent minimum capital and fixed overheads requirements. In addition, Axi undertakes an assessment of own funds requirements through its internal processes to identify additional own funds requirements of the Company as a result of (i) the material risks associated with ongoing business operations and (ii) those required to facilitate an orderly wind-down of the business.

Own funds requirement is formally reviewed, challenged and approved by the Board. Axi has assessed its additional own funds requirements using the Internal Capital Adequacy and Risk Assessment process (ICARA).

The Company has at all times met the own fund requirements. 

Governance

The Company is governed by the Governing Body. The Governing Body includes the Board of Directors and Group Executives and the Governing Body, determines the business strategy. Axi maintains a clear organisational structure with the Senior Management who are responsible for establishing and maintaining internal governance as well as implementing a risk management framework that recognises the core risks that the business faces in financial control, regulation and compliance, operations, and reputation.

Amongst other things, the Governing Body is responsible for: approving and maintaining business policies, procedures and controls; and audit, compliance and regulatory affairs. The Governing Body is permitted to delegate its authority and powers to a Senior Management or such Group employees as it deems fit.

The Governing Body acts in the best interests of the Company and its clients.

The Governing Body does rely on certain Group functions to manage, monitor and analyse key areas of responsibility, but gains sufficient information to discharge its duties. Given the size of the firm and taking proportionality into consideration, the requirement to have a separate Risk, Remuneration and Nomination Committees does not apply.

The Company adopts, as applicable, Compliance and Risk Policies. The Governing Body may also rely on the advice, reports and opinions of consultants, counsel, accountants, auditors and other expert advisers.

Senior Management are focused full-time in the business and hold no other commercial positions outside of holding positions in other Group companies.

The total number of executive directorships held by members of the Board as at 30 June 2023 are as below. Directorships held within the Group are counted as a single directorship and those in non-commercial organisations are excluded.

Remuneration

Remuneration Policy

Axi’s remuneration policy complies with regulation and aims to:

•  Align all employees and executives’ interest with those of our customers.
• Support the delivery of the Group strategy, whilst ensuing adherence to the Group’s risk appetite.
• Ensure remuneration is competitive for our markets to help the Group attract and retain talent.
• Be gender neutral and ensure fair outcomes for our people.
• Recognise that fixed and variable components should be appropriately balanced and that the variable component should be flexible enough so that in some circumstances no variable component may be paid at all.

The Group aims to attract talented people to deliver sustainably high levels of performance for its customers and ensure the ongoing success of the Group. This requires a careful balance between providing competitive salary and benefits with appropriately designed incentives that drive performance whiles managing risk.

Decision making process for remuneration policy

Axi does not meet the criteria to form a remuneration committee under SYSC 19G. In view of the nature and size of the firm, the Board does not believe it is proportionate to have a Remuneration Committee but will periodically monitor its remuneration practices to determine if the implementation of such a committee would enhance its practices. The Board has oversight of the remuneration policies and refers to the MiFIDPRU remuneration code. Remuneration is set within the context of a 12 month plan which ensures any threats to capital adequacy, liquidity and solvency caused by excessive remuneration would be identified. However, should adverse market conditions dictate, remuneration levels will be reviewed and adjusted, as appropriate, throughout the year.

The bonus arrangements are agreed annually before the end of the year and are approved by the Governing body. There is no guaranteed or specified bonus scheme but staff may receive a bonus. The Company’s annual Budget includes the level of remuneration for all staff including Material Risk Takers.

Link Between Pay and Performance

Ax’s remuneration schemes are designed to reward employees for their performance and contribution to the success of their business unit and the Group. There are three factors which impact the overall level awarded:

• Group performance
• Business Unit performance
• Personal performance

Remuneration structure

All employees are remunerated with fixed pay (salary, pension, and benefits) and variable payments which are not a greater proportion of total compensation. All variable amounts are disbursed as cash.

Employees in certain roles are eligible to participate in incentive schemes that differ from above. In sales focussed roles, there are Sales Incentive Plans that determine the variable award, based on a number of balanced factors. All schemes are reviewed annually.

The structure of the remuneration packages for Material Risk Takers is designed to be in line with the Group’s business strategy, take account of any conflicts of interest and the existing and future capital requirements of the business. Axi’s incentive schemes are designed so they do not encourage excessive risk taking.

Guaranteed Variable Remuneration

There is no guaranteed variable remuneration in place.

Severance Pay

Employees who leave the Company will be entitled to any contractual payments in line with best practice and any contractual arrangements. Any payments made will meet the requirements of regulation and any appropriate legislation and will not reward failure or misconduct.

In determining the amount of a severance payment, Axi will always seek to minimise the cost to the Company while complying with contractual terms and consider the circumstances in place at the time.

The following illustrative criteria may be considered for the purposes of determining the amount of a severance payment (but not limited to):

• The reasons for the early cessation of employment;
• The length of an individual’s service with the Group;
• The seniority of the individual’s role within the Group; and
• The potential costs of legal fees and settlement costs of any actual dispute.

Quantitative Remuneration Disclosure – Financial Year ending 30 June 2023

Senior management and members of staff whose actions have a material impact on the risk profile of the Company are classified as Material Risk Takers. In accordance with MIFIDPRU 8.6.8, the Company makes the following disclosures:

Number of Material Risk Rakers (“MRTs”) including Senior Management Functions (“SMFs”) during the performance year was 12.

Please see below remuneration information of all personnel who are considered to be material risk takers for the performance year ending 30 June 2023.

In respect of the financial year ending 30 June 2023, the total aggregate remuneration of £5,456,338 was paid to employees.

The total remuneration split between Non MRTs and MRTs is illustrated in the table below:

Remuneration information relating to SMFs and MRTs have been aggregated so as to prevent the identification of any individual/s, in accordance with MIFIDPRU 8.6.8 (7).