Regulatory Disclosures

Regulatory Disclosures

Castlefield Investment Partners LLP

Disclosure and Policy

Castlefield Investment Partners LLP (CIP) is investment management firm, group, widely recognised for our expertise in responsible and sustainable investment.

The following disclosures relate to CIP, categorised as a small non-interconnected firm (SNI) MIFIDPRU Investment firm, authorised and regulated by the FCA.

As an SNI MIFIDPRU firm under the Investment Firms Prudential Regime (IFPR), which came into effect on 1st January 2021, we are required to disclose the following remuneration information regarding our remuneration policy and practices under MIFIDPRU 8.

Our disclosures will be made annually in our Audited Annual Accounts and/or via our web site (www.castlefield.com).

This statement sets out our policy with regards to the remuneration packages and incentive schemes within our firm which is categorised as a SNI firm under IFPR. It is designed to be proportionate based on the size of our firm and the scope of our regulated activities. The  policy reflects the culture of our firm and our ability to deliver good client outcomes to our clients.

 

Our remuneration packages and incentive schemes are designed to;

  • Promote sound and effective risk management
  • Ensure conflicts of interest are avoided
  • Encourage responsible business conduct
  • Promote risk awareness and prudent risk taking
  • Be consistent with our firm’s culture and values
  • Provide good outcomes for consumers

 

For the purpose of this policy, ‘remuneration’ means any form of remuneration, including salaries, pension benefits and benefits of any kind.  Remuneration can include for example: shares and/or pension contributions. We review our remuneration structure on an annual basis.  The performance period for this disclosure runs for the period September 2021 to August 2022.

 

Capital adequacy and risk management

Castlefield Investment Partners LLP (‘the Firm’) is authorised and regulated by the UK Financial Conduct Authority (“FCA”) as an Investment Management Firm. As a result of the introduction of the Investment Firm Prudential Regime (IFPR), CIP conducts its Internal Capital Adequacy and Risk Assessment process (ICARA) at least annually.

The ICARA process is linked to our overall risk management, business planning and capital management, with each of these components informing the others. Capital planning takes place at least semi-annually together with the firm’s financial forecasting process. The ICARA process allows us to determine our own funds threshold requirement and liquid assets threshold requirement, and therefore determine how we meet our Threshold Conditions.

Our ICARA report includes the key conclusions and principles of our process:

  • We consider and account for the risk of potential harm posed to consumers and markets and the safety and soundness of the firm’s own current financial position and its ability to withstand plausible stressed conditions.
  • The findings of our analysis include the amount of capital and liquidity we consider should be held and confirmation that CIP has adequate financial resources for its size and the complexity of its business.
  • An overview of our risk management framework and governance structures.
  • We identify our material risks and determine whether these risks are within our risk appetite.
  • The adequacy of our risk management process and governance process.
  • Our capital planning and stress testing process.
  • Describes our business model, strategic planning, and earnings forecasts.
  • A credible recovery and costed wind down plan.
  • A description of the review, challenge and approval process of the ICARA.

 

Governance Framework

John Eckersley, Mark Elliott and parent company, CPL, are the Designated Members of CIP. John acts as the Senior Partner of the LLP and as its Chief Executive Officer, from an FCA perspective. In this capacity, he chairs a regular meeting of its Ordinary Members, who in turn are deemed to be its Partners. This is the body of the firm which exercises daily oversight of its activities, in conjunction with the Group’s Head of Finance.

The Designated Members are the Governing Body of the Firm and each is considered to be a Senior Manager, as defined by the rules relating to the Senior Managers and Certification Regime. To ensure they carry out their role to required standards, members of CIP’s senior management team must meet a range of criteria, such as acting with honesty and integrity, being objective and having sufficient knowledge, skills and experience. The SMCR is designed to improve culture, governance and accountability within financial services firms.

The SMFs are collectively responsible for how CIP is run and ensuring it is managed so it meets its regulatory responsibilities. An effective management body needs to include individuals with a mix of knowledge, skills and experience that are up to date and cover the major business areas of the firm and its risks, ensuring CIP is able to make informed decisions and provide effective oversight. 

Senior managers also have an important part to play in establishing and embedding the right culture and governance within firms and improving the standard of conduct throughout the business.

 

The full list of Members/Partners is:

  • John Eckersley – Designated Member, Voting Member, Managing Partner
  • Mark Elliott – Designated Member, Voting Member, Partner
  • Castlefield Partners Limited – Designated Member, Voting Member
  • David Elton – Ordinary Member, Partner
  • Simon Holman – Ordinary Member, Partner
  • John Alexander – Ordinary Member, Partner

 

Group Resource Committee (GRC)

The GRC provides support and advice to the board of CPL and to the board of each group subsidiary. Particular emphasis is placed on fostering effective communication, efficient resource allocation and the sharing of best practice. The overriding intention is that each subsidiary board should benefit from being part of a group and be able to focus their day-to-day activities on developing and growing their own business unit, for the benefit of CPL and its co-owners.

Purpose:

The purpose of the GRC is to assume and exercise shared responsibility with the Senior Partner for overseeing the businesses CPL has invested in and for advising the CPL board on key decisions it needs to make. These will include:

  • The oversight of the development and implementation of strategy, operational plans, policies, procedures and budgets as presented by the subsidiary/business units;
  • The monitoring of operating and financial performance;
  • The prioritisation and allocation of group resources on a risk-efficient basis; and
  • The oversight of group-wide initiatives and investments

 

Risk Framework

The core purpose of the risk management framework is to understand and monitor the risk profile of CIP and to ensure that adequate and effective risk management and mitigation arrangements exist. Reports submitted to the Partners meetings comprise of:

  • Risk and Control report including a risk profile dashboard
  • Risk Register
  • Top Risks of business

Castlefield is committed to developing a sustainable governance structure, incorporating effecting risk management. The regulator is clear that firms should have robust governance and risk management structures. New regulations such as the Consumer Duty, to be implemented within 2023, reinforces the regulator’s focus on avoiding consumer harm and making firms accountable for their oversight obligations. As a result of our own internal review of governance and reporting lines, with consideration of the regulatory landscape, risk reports are submitted to the Partners, in the first instance, outlining key risks identified as a result of monitoring activities, where risk limits or agreed parameters are close to or at risk of exceeding agreed acceptable limits. This ensures the Partners have direct oversight of the risks that affect their own business. The Partners seek to understand and review the material risks across the firm and the resultant risk profile of the business in the following ways:

  • To understand and assess the implications of business strategy on the agreed risk profile
  • To agree any risk mitigation required, including prioritisation, and oversight of the progress of this activity
  • To oversee the Risk & Control Management status of CIP
  • To discuss any emerging risks or threats to the capital of CIP
  • To support the provision of information required to complete the capital adequacy risk assessments on a regular basis.

The risk and control report provides a high-level summary of the risks identified by CIP, rated high, medium or low and any new, re-rated or proposal to close items. The risk register is updated by the nominated risk champion in CIP who works with the business area to assess new, ongoing and emerging risks within the business. Twice a year, a top risks assessment is carried out and this feeds into the risk reporting via the risk register which is submitted to the Partners for review on a regular basis. The Head of Governance and Risk is certified under SMCR for overseeing the risk framework, working with the nominated risk champions within the business area.

 

Compliance Reporting

Compliance oversight reports along with regulatory updates are compiled and presented by the Head of Governance and Risk at least biannually. These reports are presented to the management team for consideration and key action points identified as appropriate.

Money Laundering Risk Assessment

The MLRO will use this annual assessment to drive the necessary anti-money laundering and anti-financial crime initiatives within the firm.

 

Regulatory Disclosures

 

Disclosures: Remuneration Policy

The Firm has nine Code Staff, consisting of certified individuals and those holding Senior Manager responsibilities - six of them are working members of Castlefield Investment Partners LLP (described as a Partner). The other two individuals, Ms Hanlon and Mr Richardson, are captured by the Code in their capacity as Senior Managers with  responsibilities for compliance and MLRO oversight respectively.

Bonus Scheme One: There are six members of this scheme, each of whom is a member of the LLP. Each of these working Partners/members has an agreed, fixed prior share of the profits of the LLP (where such profits exist). The share of the four Ordinary Members (Messrs Alexander, Elton, Hammerson and Holman) is determined by the Managing Partner (Mr Eckersley), who is also one of three Designated Members of the LLP (the others being Mr Elliott and the Group holding company, Castlefield Partners Limited). The profit share of Mr Eckersley must be agreed by Castlefield Partners Limited (CPL). CIP LLP is effectively controlled by CPL. The directors of CPL are Mr Eckersley, Ms Hanlon, Ms Mosam, Ms Holland, E Niziolek-Wilson and Mr Jenkins and they serve in this capacity at the discretion of the shareholders of CPL – the main external ones being the Burdens’ Charitable Foundation and Piccadilly Trust (an Employee Share Ownership Trust).

Beyond the fixed remuneration each working member of the LLP receives, each is entitled to a share of the residual profits of the LLP, after account is taken of the prior fixed share of profits. This share is agreed by CPL as the ‘parent company’ and is (currently) 20%. This share forms a pool, to be distributed amongst the members, at the discretion of the Designated Members and at the outset is based on the budgeted profits for the year. Before the final variable profit is paid out, a calculation is performed based on audited profits, which means the actual percentage paid will vary to budget, but this does not alter the firm’s strategy, which remains that of managing money in a responsible and ethical way. The partners will only take their variable profit share once all costs have been met.

For 2021-22, the variable element of remuneration received by each member was budgeted to be 25% of the total.

Each of the working members of the LLP is also a shareholder in the holding company (CPL) and each has paid for their stake in this business. Each member caught by the Code is therefore focused not only on short term reward (which is predominantly of a fixed nature) but also on long term shareholder value creation.

Bonus Scheme Two: All Partners and Associates in the Castlefield group who are not in client facing roles and therefore in some cases eligible for target-based remuneration, are eligible for a modest bonus from CPL based on responsibility levels and performance. Mr Eckersley, Mr Richardson Ms Gannon and Ms Hanlon are eligible under this scheme, although any bonus paid is in respect of their work for the group holding company.  The bonus is calculated as a percentage of salary without reference to profit. It is discretionary, does not exceed 15% of total remuneration and is paid only if the firm has enough regulatory capital. No bonus was paid in respect of the 2021-22 year.

Executive Incentive Scheme 1: This applies to Mr Eckersley, as a director of CPL and is overseen by the CPL Board. Apart from the remuneration he derives as a member of CIP LLP, Mr Eckersley receives additional fixed remuneration, including pension contributions of 5% of qualifying earnings, in his capacity as a director of CPL (the non-regulated holding company of the group) and is eligible to join the Castlefield Share Incentive Plan. He is theoretically entitled to a discretionary bonus determined by the CPL Board with reference to external market analysis and the performance of the business, compared to pre-agreed targets. No bonus was paid in respect of 2021-22.

His main long-term incentive comes via his interest in the equity capital of the group holding company, CPL.

Executive Incentive Scheme 2: This applies to Mr Eckersley, Ms Hanlon Ms Gannon and Mr Richardson. All are employed by CPL and receive a fixed salary, including pension contributions of 5% of qualifying earnings in respect of their group-wide roles. All have an interest in the equity capital of the holding company and are entitled to join the Castlefield Share Incentive Plan. Their shareholding represents their main long-term incentive.

In addition, as employees of CPL, all are eligible to receive a share of any flat rate bonus payment based on the results of the year ended 31 August 2022 (the EO bonus). This bonus is approximately £1,000 and is therefore immaterial in this context.

 

Quantitative Disclosures

As an SNI MIFIDPRU investment firm, we are required to disclose the total remuneration of all our co-owners split between fixed and variable remuneration for our performance year end which is also our financial year end.

For our year ending August 2022 our total remuneration is split as follows:

Type of Remuneration

Amount £000s

Fixed Remuneration

£ 500

Variable Remuneration (due, whether paid or unpaid as at 31 August 2022)

£ 112

Total Remuneration

£ 612

 

 

In summary, the Firm steers clear of large elements of variable remuneration, whilst paying what is believed to be fair fixed remuneration. Equity ownership amongst all colleagues is encouraged. There is no direct link between any one person’s remuneration and products sold or promoted to clients and/or potential clients. We have stressed a team approach to clients within CIP LLP.

The Firm’s detailed Remuneration Policy was approved for publication on 26 May 2023 and was accordingly subsequently published via this web site.