Jackdaw Capital Management Limited (“the Firm”) is authorised and regulated by the Financial Conduct Authority (firm reference number: 655767) and is categorised as a BIPRU €50,000 Limited Licence Firm for regulatory purposes.
Disclosure under Pillar 3 of Capital Requirements Directive
The disclosure has been prepared by the firm in accordance with BIPRU 11 and summarises the material disclosures the firm is required to make under Pillar 3 of the Capital Requirements Directive.
Risk Management: The day-to-day management of the risks of the firm is carried out by its management who meet formally on a quarterly basis with a set agenda and key decisions are documented. The firm is supported in its compliance and its financial accounts by independent providers. The firm receives regular management accounts from which it is able to monitor and project its capital resources. It has a compliance manual, a compliance monitoring programme and an ICAAP process that ensures it is able to manage the risks that it faces. Given the nature and activities of the firm, its risk appetite is low. It does not deal in a principal capacity and therefore does not have a trading book.
The key risks that it faces are as follows:
Market risk: The main market risk of the firm is foreign exchange risk as a result of foreign currency holdings, primarily Euros. The management monitors this risk on a daily basis.
Interest rate risk: The firm is not exposed to interest rate risk as it does not rely on borrowings to meet operating expenditure and does not make loans to clients.
Credit risk: The main credit risk of the firm is a defaulting debtor. The firm does not extend credit to its clients.
Liquidity risk: The liquidity risk that the firm faces is the inability to settle its liabilities as they fall due. Part of the risk management structure noted above monitors the liquidity position of the firm at all times. Bank reconciliations and cash flows are prepared on a regular basis to ensure that all liabilities are understood and able to be settled as they fall due. Cash resources of the firm are maintained in accounts with instant access as noted above.
Operational risk: As a BIPRU €50,000 Limited Licence firm, the firm is not subject to operational risk under Pillar 1. However, the firm is aware of the reputational damage that could result from a failure in operating procedures. The firm’s key policy and procedures are documented in the compliance manual and monitored via the compliance monitoring programme. Changes to procedures are communicated to management and staff as they occur and if significant all individuals will provide a written confirmation of their understanding and acknowledgement of the changes. Management and staff remain aware of the policies and procedures and periodically confirm their compliance via an annual compliance declaration.
Remuneration: Given the nature and small size of the business, remuneration for all employees is set by the management of the Firm. The aggregate level of remuneration earned by the management is disclosed in our audited financial statements. The firm is a BIPRU Limited Licence firm and is therefore a “tier three” firm for the purposes of the FCA’s General Guidance on proportionality in relation to its Remuneration Code. Tier three firms are permitted to disapply certain principles contained within the FCA’s Remuneration Code. Where the firm has elected to disapply certain principles this has been noted below in the relevant section of the policy.
Capital Resources: As the firm is a BIPRU €50,000 Limited Licence Firm it has calculated its capital resources in accordance with GENPRU 2.2. In the opinion of the management, the Firm has a surplus of capital resources over its Pillar 1 and Pillar 2 capital resources requirements. The Firm has undertaken an Internal Capital Adequacy Assessment Process (ICAAP) to determine whether it needs any further regulatory capital due to the risks it faces as set out above. As a result of this, the Firm has concluded that it needs no additional level of capital resources to meet its requirements under Pillar 2.
UK Stewardship Code
Stewardship is defined as “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.” Under COBS 2.2.3 of the FCA Handbook, we are required to make a public disclosure in relation to the nature of our commitment to the Stewardship Code, which was published by the Financial Reporting Council (‘FRC’) in July 2010 and amended in September 2012 and January 2020. Where we do not commit to the Code we are required to disclose our alternative investment strategy.
The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies. The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. It is of course legitimate for some asset managers not to engage with companies, depending on their investment strategy.
The Code does not prescribe a single approach to effective stewardship. Instead, it allows organisations to meet the expectations in a manner that is aligned with their own business model and strategy. The investment market has changed significantly since the publication of the first UK Stewardship Code. There has been significant growth in investment in assets other than listed equity, such as fixed income bonds, real estate and infrastructure. These investments have different terms, investment periods, rights and responsibilities and signatories will need to consider how to exercise stewardship effectively in these circumstances.
Environmental, particularly climate change, and social factors, in addition to governance, have become material issues for investors to consider when making investment decisions and undertaking stewardship. The Code also recognises that asset owners and asset managers play an important role as guardians of market integrity and in working to minimise systemic risks as well as being stewards of the investments in their portfolios.
There are twelve “Apply or Explain” principles for asset owners and asset managers:
- Purpose, strategy and culture
- Governance, resources and incentives
- Conflicts of interest
- Promoting well-functioning markets
- Review and assurance
- Client and beneficiary needs
- Stewardship, investment and ESG integration
- Monitoring managers and service providers
- Exercising rights and responsibilities
Whilst we support the principles underlying the Code, the Firm does not currently comply with the Code for the following reasons: Accordingly, whilst the Firm supports the Code as a mechanism to promote best practice in the institutional shareholder conduct of UK listed companies, it does not consider the Code or its principles to be appropriate for its strategies.