Northland Capital Partners Limited - Pillar III Disclosures
Northland Capital Partners Limited (“NCPL” or the “Firm”) is authorised and regulated by the Financial Conduct Authority (“FCA”).
Regulatory capital framework
The disclosures in this document are prepared in accordance with the Capital Requirements Directive (CRD IV). In the United Kingdom, CRD IV has been implemented by the Financial Conduct Authority (“FCA”) in its regulations through the General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Investment Firms (“IFPRU”). Under CRD IV, the regulatory capital framework consists of three pillars:
Pillar I specifies the minimum amount of capital that a financial services firm is required to maintain to support its business;
Pillar II requires the firm to assess the need to hold additional capital in respect of any risks not adequately covered under Pillar 1;
Pillar III specifies the disclosures which the firm is required to make to enable market participants to assess information about its capital, its risk exposures and its risk management processes.
Basis and frequency of disclosure
The Firm has an accounting reference date of 31 March and the information in this document has been prepared as at 31 March 2020. The disclosures are not subject to audit and have not been independently verified but have been reviewed and approved by the Firm’s Directors.
The Pillar III disclosures are made annually as soon as practicable after completion of the annual financial statements, unless circumstances warrant update on a more frequent basis.
Baden Hill is a trading name of Northland Capital Partners Limited
The Firm provides corporate broking services to public and private companies.
It also may provide access to investment research and research analysts for institutional clients under MiFID II.
Statement of Risk Appetite
The Firm’s risk appetite is determined by the Directors and reviewed at least annually.
The Directors have set an overall risk appetite for the Firm as medium to low reflecting the introducer/relationship-based nature of its services and transaction fees, the Firm’s reputation in the market and the experience of its Directors.
Under IFPRU 2.2.27, a firm must have in place sound, effective and comprehensive strategies, processes and systems that enable it to identify and manage the major sources of risks to its business and operations, including risks in each of the categories set out below where they are relevant to the firm:
Risk categories relevant to the Firm:
• Credit and counterparty risk
• Market risk
• Liquidity risk
• Operational risk
• Concentration risk
• Business risk
Risk categories not relevant to the Firm:
• Residual risk
• Securitisation risk
• Interest rate risk
• Risk of excessive leverage
• Pension obligation risk
• Group risk
The Directors review the risks facing the Firm and the controls and procedures that have been put in place to mitigate and manage them. The evaluation of these risks, the establishing of risk management procedures and policies to control them and the assessment of the adequacy of these controls is the responsibility of the Directors.
The taking on of new clients and new business is subject to a thorough review process which is reviewed by the New Business Committee. New clients are also subject to a thorough legal, regulatory and anti- money laundering review prior to the Firm transacting with them.
The monitoring and controlling of risk is a fundamental part of the Firm’s management process. At least annually, the risk assessment is reviewed and documented and a determination made of the level of internal capital required to be maintained by the Firm in the light of the risks identified (Pillar 2 capital).
The major risks affecting the Firm’s business include:
Business Risk/ Concentration risk
Business risk is the risk to a firm arising from changes in its business, including:
a. the risk to earnings posed by volatile revenue;
b. the broader risk of a firm's business model or strategy proving inappropriate due to macro-economic, geopolitical, industry, regulatory or other factors; and
c. the risk that a firm may not be able to carry out its business plan and desired strategy.
Key elements of business risk that are relevant to NCPL’s business model are (i) volatility and uncertainty in its revenue levels from transaction income; (ii) confidence of investors in stock markets and their willingness to invest in fundraisings; and (iii) regulatory risk to the Firm as a whole.
The risk is mitigated by the level of expertise of its employees and its process of controlling the taking on of new clients and transactions.
In addition, the Firm has a well-established set of procedures and policies to ensure compliance with its regulatory obligations.
The Firm does not consider its remuneration policy to be a significant element of business risk as it is not an IFPRU investment firm, does not have any trading operations and does not reward employees for high risk/high return activities. The Firm’s remuneration policy is discussed further below.
Liquidity risk is the risk that a firm, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due or, can secure such resources only at excessive cost.
Liquidity risk is relevant to the Firm as its transaction-based revenue is variable and unpredictable whilst costs are broadly fixed.
Liquidity risk is mitigated and controlled through the Firm’s regular monitoring and forecasting of its liquidity position. The Firm retains a level of capital and liquid resources in excess of its regulatory requirement in order to provide a suitable buffer.
Credit risk is the risk that a counterparty will cause financial loss to the Firm by failing to meet its contractual obligations. Credit risk is controlled through the process of approving new clients and transactions and through the close monitoring of outstanding debts.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
The Directors acknowledge that operational risk cannot be completely eliminated but seek to minimise the likelihood and impact of such risks.
The most significant elements of operational risk identified include:
• Competition from other advisory firms and brokers;
• Reputational damage through the actions of the Firm or its employees or its clients;
• Dependence on key employees.
Own Funds and Capital Requirements
The Firm calculates and reports its capital resources, capital requirements and capital ratios in accordance with FCA regulations as set out in IFPRU.
These disclosures are made in compliance with Article 450 of Capital Requirements Regulations (Regulation EU no 575/2013).
NCPL’s remuneration policy is determined by the Directors with no input from external advisers, and reviewed annually. It is designed to attract and retain high quality individuals having regard to the Firm’s business objectives and strategy and its values (including risk appetite) and culture.
Performance awards are based on an individual’s overall contribution to the Firm’s performance, taking into account both monetary and non-monetary considerations, and the overall level of profit of the Firm.