Disclosure

SL Investment Management MiFIDPRU Disclosure 31 December 2022

Introduction

SL Investment Management Limited (“SL”, the “Firm” or “we”) is a MiFID investment firm authorised and regulated by the Financial Conduct Authority (FCA). We are required to comply with the disclosure requirements under the Investment Firms Prudential Regime (IFPR), which is set out in the FCA Handbook MIFIDPRU 8. This disclosure supersedes the previous Pillar 3 disclosure.

For the purpose of prudential regulations, we are classified as an SNI (small and non-interconnected) firm and are subject to the basic requirements. We are required to provide a level of detail in our disclosures that is appropriate to our size and internal organisation, and to the nature, scope, and complexity of our activities.

Risk Management

The Board of SL has the ultimate responsibility for the development of appropriate strategies, systems, and controls for the management of risks within the business.

Risk management policy and objectives

The primary objective of SL’s Risk Management Policy is for everyone within SL to adopt a consistent and effective approach to the management of risks. This requires that:

• Everyone is aware of the importance of identifying risks whether in existing procedures or within new initiatives;
• Risks are reported and escalated in an appropriate and timely manner;
• Risks are assessed consistently across the business; and
• Risks are treated in an appropriate way.

To achieve this, the implementation of the Risk Management Policy will:

• Embed the management of risk into the culture of SL;
• Ensure that regulatory obligations are met or (where appropriate) exceeded;
• Safeguard the interests of the shareholders, employees and clients of SL;
• Enhance the current and future service delivery through the systematic management of risk;
• Minimise the possibility of organisational failure; and
• Protect and enhance the reputation of SL.

Governance arrangements

SL’s system of risk governance relies on several committees and management processes which bring together reports on the management of risk at various levels. The governance process relies upon regular risk assessments and reviews of existing and new opportunities, by considering the risk exposure arising from each service and function.

The Board of SL retains ultimate responsibility for setting the Firm’s risk appetite and reviewing the risks which the Board considers sufficiently significant that they might prevent the delivery of strategy or threaten the firm’s continued existence.

The Executive Directors are responsible for the day-to-day management of the Firm and are relied upon by the Board to implement the Firm’s risk management policies and procedures, in line with the risk management framework.

The Risk Committee is constituted by the Board of SL to assist it in discharging its responsibility in respect of Risk Management. As such, the Committee has the responsibility for providing oversight and advice to the Board on the current risk exposures and is responsible for making recommendations to the Board in relation to the risk management framework, the Firm’s risk appetite and tolerance in pursuit of business objectives.

The Compliance & Risk team establishes, maintains and reviews the risk management systems, including the risk management policies and procedures.

Financial Risks and Instruments

The Firm’s principal financial instruments comprise cash, trade debtors, other debtors and creditors, and certain other accruals. The main risks associated with these financial assets and liabilities are set out below.

Foreign currency risk

The Firm’s exposure to foreign currency risk arises from revenues denominated in US and Canadian dollars. Approximately 92% of the Firm’s turnover is generated from currencies other than GBP. The Firm typically translates foreign currency to sterling on a monthly basis, ensuring that exchange rate risks are at an acceptable level.

Credit risk

Revenue is primarily generated from established clients and is typically paid on the completion of policies purchased by the client or from recurring management and advisory service fees generated from existing and new clients and calculated as a percentage of assets under management or advice. Credit risk is deemed to be low due to the long standing and transparent nature of the Firm’s relationships with its clients, and no significant concentration of risk with any specific clients.

Liquidity risk

Liquidity risk is the risk of the Firm failing to meet its short-term liabilities as they fall due. The Firm’s liquidity risk is managed by the Firm’s senior finance management through regular assessment of required cash levels. The directors believe that the Firm’s available liquidity is more than adequate for the future needs of the Firm.

The Firm is required to hold an amount of liquid assets equal to one-third of its Fixed Overhead Requirement. This is the basic liquid asset requirement and is made up of approved liquid assets, which include, cash, units or shares in short-term regulated money market funds, short-term deposits at UK credit institutions and UK traded endowment policies.

Own Funds Requirement

The Firm must, at all times, hold own funds and liquid assets which are adequate, both to their amount and their quality, to ensure that the Firm is able to remain financially viable throughout the economic cycle and be able to address any material potential harm that may result from its going activities; and to ensure that the Firm’s business can be wound down in an orderly manner, minimising harm to consumers or to other market participants.

As a result of the introduction of the IFPR, the Firm has conducted and documented its Internal Capital Adequacy and Risk Assessment process (ICARA) to identify whether the Firm complies with the abovementioned overall financial adequacy rule. The Firm may hold additional own funds or additional liquid assets above the Firm’s own funds requirement or basic liquid assets requirement to manage the potential harms identified.

The Firm’s ICARA is reviewed and approved by the Board at least annually, or more often as deemed appropriate.

As an SNI firm, the Firm is required to maintain an amount that is the higher of the:

• Permanent minimum capital requirement (PMR); and
• Fixed overheads requirement (FOR), which is an amount equal to three months of a firm’s relevant expenditure.

The Firm’s own funds requirements according to MIFIDPRU 4.3 are as follows:

Remuneration

The Firm is required to comply with the MIFIDPRU Remuneration Code under IFPR, which aims to ensure that we have risk-focused remuneration policies that are consistent with and promote sound and effective risk management in the long-term interests of the Firm and our clients and do not expose the Firm or our clients to excessive risk.

Our approach and objectives

We have formulated the approach in our remuneration policy and practices with reference to the guidance set out by the FCA. We consider the appropriate balance between fixed and variable remuneration as well as the constraints in place to avoid a conflict of interest between staff incentives and the best interests of clients.

Governance and decision-making procedures

The management body of the Firm is responsible for overseeing the implementation of our remuneration policy and ensuring our compliance with the MIFIDPRU Remuneration Code.

One role of the management body of the Firm is to ensure the extent of the variable remuneration at the Firm cannot affect the Firm’s ability to ensure a sound capital base. The management body of the Firm is responsible for overseeing the performance management process; reviewing and approving the remuneration policy, variable remuneration pool and caps, eligibility of participation in variable remuneration schemes, as well as the approval of variable remuneration awarded to individuals.

We assess our staff members under our performance management process on an ongoing basis with an annual performance assessment outcome being used as a contributing factor in the determination of remuneration.

The remuneration of senior staff in risk management and compliance functions is directly overseen by the management body of the Firm. Any remuneration to staff with control functions is awarded according to objectives linked to their functions and remains independent from the business units they oversee.

No variable remuneration is awarded to members of the management body who do not perform any executive function in the Firm.

The Firm’s remuneration policies and practices are developed in consultation with our external consultants, Bovill.

Key characteristics of remuneration policies and practices

All staff receive fixed remuneration in the form of base salary and are considered for discretionary variable remuneration in the form of a bonus where eligible.

Base Salary

We review the base salary of our staff members on an annual basis by considering factors such as market information and individual performance.

Bonus

The Firm’s bonus scheme is a discretionary reward scheme determined by the SL Board and ensures that the aggregate spend on compensation is directly linked to the Firm’s financial performance. All bonuses are dependent on the firm’s overall financial result to ensure a sound capital base.

On an individual level, the scheme is designed and linked to both financial and non-financial criteria, rewarding behaviours that promote positive non-financial outcomes for the firm and limiting eventual behaviours contrary to the firm’s values.

The bonus pool and other individual bonuses will be adjusted as deemed necessary by the management body of the Firm in consideration of the following:

• Any compliance or regulatory issues that have occurred or are under investigation internally or externally;
• Any persistent or significant breaches in either financial or non-financial KPIs;
• Any conduct related matters that have occurred or are under investigation internally or externally;
• Any matters that adversely impact client outcomes; and
• Any other factors that may publicly impact the Firm’s brand or reputation.

Control function staff are independent of the business units they oversee and are remunerated in line with the achievement of the objectives of their functions. The determination of the level of remuneration of such staff is independent of the performance of the business areas they oversee.

Quantitative disclosures

For the financial year ending 31 December 2022, the amount of remuneration awarded is as follows:

Own funds – Composition of regulatory own funds

Own funds – Main features of own instruments issued by the Firm