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Rockhold Asset Management - MIFIDPRU 8 Disclosure

Regulatory Disclosures

Risk Management

Objectives and policies:

The firm’s risk management framework has been developed in order to enable it to identify, monitor, manage and mitigate risks to which it and its customers may be exposed.

The risk framework incorporates a variety of risk categories including:

  • Operational risk
  • Liquidity risk
  • Regulatory risk
  • Reputational risk
  • Concentration risk

Rockhold’s approach to risk management begins with identification and assessment of actual or potential risks. All staff are tasked with identifying and reporting potential risks. Rockhold has a Risk Committee that meets on a monthly basis at which the Risk Log is discussed. Each risk within the Risk Log is allocated to an owner who is required to assess whether risks are within tolerance, outside tolerance or expected to be back within tolerance as a result of business as usual activities. Where a risk is outside tolerance each risk owner is required to document planned actions and an expected date when the risk will be back within tolerance.

The risk population is recorded within the firm’s Risk Log which outlines the nature of the risk and the rating. Ratings are comprised of “Impact” and “Probability” scores and any associated actions or mitigants required to reduce the impact of the risk. Risks that cannot be fully mitigated may require the firm to hold additional “Own Funds” capital against its impact.

Calculation of potential Own Fund and Own Funds Requirements is completed and documented via the ICARA process.

In addition to assessing the quantum of Own Funds that may be needed, the firm must ensure that sufficient levels and appropriate types of liquid financial resources are held, in order meet the needs of its ongoing business activities or to ensure an orderly wind down of the business. Details of the firm’s liquidity risk management arrangements and resources are set out in the ICARA.

The firm also assesses its level of concentration risk by monitoring its exposure, whether direct or indirect to, a single client or group of connected clients. As with other risk categories, the firm assesses the need for additional controls or own funds for concentration risk via its ICARA.

Risk Strategy

  • To ensure that risk management is embedded in core operating and decision-making processes and within the culture of the firm as a whole
  • To employ a risk appetite framework
  • The qualitative and quantitative monitoring, escalation processes and action management plans to ensure that the business operates within it’s appetite and tolerances
  • To ensure that responsibilities are clearly assigned to appropriately skilled and competent individuals
  • To ensure that the firm has appropriate policies and procedures enabling it to identify, manage and mitigate risks

 

Risk Governance

  • The Rockhold board is accountable for approving the risk framework and ensuring that the businesses continues to operate within it’s set parameters
  • The board of Rockhold has delegated responsibility for identification, managing and monitoring risks within the firm to the Risk Committee. The Committee membership is formed of representatives from different departments
  • The Risk Committee that meets on a monthly basis at which the Risk Log is discussed. Each risk within the Risk Log is allocated to an owner who is required to assess whether risks are within tolerance, outside tolerance or expected to be back within tolerance as a result of business as usual activities. Where a risk is outside tolerance each risk owner is required to document planned actions and an expected date when the risk will be back within tolerance.
  • The board are responsible for determining the risk appetite and levels of risk tolerance.
  • .
  • The Risk Committee provides periodic risk management reports to the board

Governance

Proportionate to the scale of the firm and it’s business model, The firm’s governance framework ensures effective and prudent management of its business activities. The firm’s governance arrangements are designed in a manner that ensures appropriate segregation of duties, identification, and mitigation of actual or potential conflicts of interests.

The board, as governing body of the firm are responsible for the design, implementation and oversight of its governance framework.

Business strategy and potential harms

Rockhold derives income from investment management fees associated with the funds and portfolios it offers to investors.

Rockhold works with investment partners who are appointed to run investment mandates set by Rockhold, in exchange for a share of revenue.

Rockhold investment solutions are distributed via financial advisers within the ASHL group. For restricted advisers, this forms a core part of the proposition they offer to clients. IFAs within the group are provided with the necessary information and support to allow them to recommend the solutions to their clients as well should they wish. The Rockhold investment team works with advisers across the group to build awareness and engagement of the proposition to increase adoption.

The firm have assessed and documented the potential harms that may arise from its current business strategy. As set out in the firm’s current ICARA, the harms have been categorised into: Risk to firm/ Risk to Market/ Risk to Client.

A description of each and the related controls or mitigants are set out below:

Risk to client:

Portfolios do not adhere to mandates, resulting in potentially unsuitable investment holdings which leading to poor client outcomes. This risk will be mitigated by monitoring of the portfolios/funds to ensure these adhere to agreed mandates. Regular Internal audits will be conducted to monitor mandate adherence whether mandates are being adhered to. External Investment Advisers, are contractually obliged to provide appropriate redress as a result of mandates not being adhered to which results in client detriment. The portfolios and funds are subject to oversight by the Rockhold Investment Committee and Risk Committees.

Trading errors result in losses for clients. This risk will be mitigated by regular Internal audits being conducted to monitor any trading errors. Trades are placed and executed by our external investment advisers who are required to notify and compensate the firm for losses, including opportunity cost, arising from trade errors.   Advisers are be contractually obliged to provide appropriate redress as a result of trading errors which result in client detriment.  

Incorrect information is provided to advisers and/or clients about regarding the nature of and risks associated with the investment solutions offered by Rockhold. This risk will be mitigated by any information provided to advisers/clients being subject to an internal sign off process.

Risk to firm:

The proposition is not sufficiently adopted by advisers within the ASHL group to ensure its viability. This risk will be mitigated by promotion of the Rockhold investment solution to advisers within the group and recruitment of restricted advisers within Lyncombe Consultants Limited.

Risk to market:

No material harms have been identified.

Financial Resources

Own Funds

MIFIDPRU 8 Disclosure: As of 30th June 2022, the firm had an Own Funds Requirement of £50000. At that time, the firm held own funds of £54000, thus meeting its Regulatory Financial Resources Requirement.

Please refer to Annex A below for details.

Overall Financial Adequacy

Rockhold must, at all times, hold own funds and liquid assets which are adequate, both as to their amount and their quality, to ensure that:

  • the firm is able to remain financially viable throughout the economic cycle, with the ability to address any material potential harm that may result from its ongoing activities; and
  • the firm’s business can be wound down in an orderly manner, minimising harm to consumers or to other market participants.

The firm’s Risk Management framework summarised above has been designed to ensure compliance with the requirements the Overall Financial Adequacy rule.

The firm’s policies and procedures require it to identify, monitor and manage risks and to ensure that at all times, adequate levels of capital are retained both in terms of amount and type. In addition to the firm’s risk management policies, procedures and governance, the firm undertakes periodic independent testing of its adherence to the requirements of MIFIDPRU.

MIFIDPRU 8 Annex A

Own Funds disclosure

Rockhold Asset Management Limited

 

Composition of regulatory own funds

 

Item

Amount (GBP 000s)

Balance sheet reference

1

Own Funds

54

 

2

TIER 1 CAPITAL

54

 

3

COMMON EQUITY TIER 1 CAPITAL

 

 

4

Fully paid-up capital instruments

 

 

5

Share premium

 

 

6

Retained earnings

 

 

7

Accumulated other comprehensive income

 

 

8

Other reserves

 

 

9

Adjustments to CET1 due to prudential filters

 

 

10

Other funds

 

 

11

(-) Total deductions from Common Equity Tier 1

 

 

19

CET1: Other capital elements, deductions and adjustments

 

 

20

Additional Tier 1 Capital

0

 

21

Fully paid up, directly issued capital instruments

 

 

22

Share premium

 

 

23

TOTAL DEDUCTIONS FROM ADDITIONAL TIER 1

 

 

24

Additional Tier 1: Other capital elements, deductions and adjustments

 

 

25

TIER 2 CAPITAL

0

 

26

Fully paid up, directly issued capital instruments

 

 

27

Share premium

 

 

28

(-) TOTAL DEDUCTIONS FROM TIER 2

 

 

29

Tier 2:Other capital elements, deductions and adjustments

 

 

 

 

 

 

 

 

 

Own Funds: reconciliation of regulatory own funds to balance sheet in audited financial statements

 

 

 

 

 

a.

b.

c.

 

 

Balance sheet as om audited financial statements

Under regulatory scope of consolidation

Cross reference to template OF1

 

 

As at period end 31/01/22

As at period end

 

Assets- Breakdown by asset class according to the balance sheet in the audited financial statements

1

Sundry debtors

9878

9878

 

2

Cash at bank and in hand

61079

61079

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

xx

Total assets

70957

70957

 

Liabilities – Breakdown by liability classes according to the balance sheet shown in the audited financial statements

1

Creditors

14111

14111

 

2

Accruals

2350

2350

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

xx

Total liabilities

16461

16461

 

Shareholders equity

1

Retained earnings

47994

47994

 

2

Share premium account

4700

4700

 

3

Called up share capital

1802

1802

 

 

 

 

 

 

xx

Total shareholder equity

54496

54496

 

 

Own funds: Features of own instruments issued by the firm:

 NA.

 

Engagement Policy

RAM delegate investment management to external advisers and do not directly engage with investee companies or exercise proxy voting.  Accordingly, the firm has not developed an Engagement policy. 

Our approach to stewardship and engagement is to oversee the engagement arrangements adopted by our delegates.  We focus on assessing the consistency of our investment advisers’ policies with our investment strategy, including our ESG objectives. 

As RAM do not manage investments directly, we do not subscribe to the Financial Reporting Council Stewardship Code, instead, we seek to ensure that our delegate's investment approach is consistent with the FRC's standards.

Best Execution Policy

Introduction

When placing or executing client orders, the firm is required to ensure that it achieves the best execution outcome for that client or clients. As an investment management firm, Rockhold is responsible for ensuring that it, or it’s delegates, achieve the best outcome for clients when executing trades.
This policy sets out how the firm meets its order execution obligations.


IFSL Rockhold Funds

Rockhold delegates trade placement and execution for the funds to Marlborough Investment Management (MIM). In accordance with our regulatory duties, Rockhold are required to ensure that MIM, achieves the best possible results for clients, taking into account the execution factors.
Rockhold reviews MIM’s order execution arrangements and outcomes through a combination of assurance reviews and analysis. These include reviewing MIM’s Order Execution policy, seeking periodic attestations from MIM as to the quality of execution outcomes achieved and via independent sample testing.

All orders are placed in accordance with this Best Execution Policy and in accordance with the best execution rules of the Financial Conduct Authority (FCA). MIM will keep a record of every order and transaction in line with MiFiD record keeping requirements.

Model Portfolios

Investment management of private client portfolios is delegated to Alpha Beta (AB). In managing these portfolios, AB are also responsible for order placement and execution.

As with the IFSL Rockhold Fund procedures above, Rockhold reviews AB’s order execution arrangements, outcomes through independent assurance testing and via reporting provided by AlphaBeta themselves,

Best execution criteria

Rockhold does not place orders directly with the market. This activity has been delegated to Marlborough Investment Management (IFSK Rockhold Funds) and Alpha Beta (Private client portfolios). For this reason, the firm has determined a number of high-level execution factors, which it expects its delegates to adhere to at a minimum, when executing trades on its behalf. These include:

  1. The characteristics of the client including the categorisation of the client as a retail or professional
  2. The characteristics of the client order
  3. The characteristics of the financial instruments that are the subject of that order and;
  4. The characteristics of the execution venues to which that order can be directed.

Execution factors

The factors and their importance are as follows:

  1. Price
    Price normally will be the most significant factor in obtaining the best possible outcome for clients. However, in some circumstances,our delegates may determine that other execution factors are more important than price in obtaining the best possible outcome.

  2. Cost
    In order to calculate the overall price, Rockhold will look at the ‘total consideration’. This is the price of the financial instrument together with the costs related to execution, which include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.

  3. Size and speed
    The market may be quoting a price that represents trading in a particular size, but this may not be the size that our delegate wishes to trade in. Large size orders through a platform may be given to a broker to negotiate and execute. It can also be important, particularly when trading for the funds, that buy and sell orders are executed at the same time to ensure settlement proceeds are available to meet new purchases.

  4. Likelihood of execution and settlement
    Transactions in quoted shares, ETFs and AIM-listed shares are settled through the CREST clearing system and as such, Rockhold does not regard the likelihood of settlement as relevant to its execution policy.

  5. Specific instructions
    In the event that we receive a specific instruction from a client in relation to the execution of an order, we will execute the order in accordance with the instructions provided. Clients should be aware that following instructions may require us to deviate from our typical order execution procedures which may impair our (or our delegates’s) ability to achieve the best execution outcome in relation to the trade in question.

  6. Execution venues
    Rockhold and it’s delegates do not execute trades directly with the market, instead they place trades with brokers. For the purpose of the FCA rules, the firm reviews the process by which it’s delegates review and select execution venues which are typically third party brokerage firms. This assessment form’s part of the firm’s order execution oversight arrangements.

Monitoring and review

As outlined above, in order to meet Rockhold regulatory duties to ensure the best outcome for our clients, we undertake ongoing analysis of the quality of execution carried out on our behalf. This will be carried out on at least a quarterly basis as part of the Rockhold Investment Committee and via our Compliance Monitoring Programme

We will review this Best Execution policy on at least an annual basis. Should a material change to our order execution arrangements occur, we will update our policy.

Rockhold Asset Management Ltd
September 2022