EFFECTIVE 31 December 2017


EthicalFin Limited (the ‘Company’ or the ‘Firm’) was incorporated as a limited company in England and Wales on 28 May 2008. The Firm is authorised and regulated by the Financial Conduct Authority (“FCA”) with FRN 517378 and acts as a corporate finance advisor to qualified investors and placement agent for financial instruments. The Firm is only permitted to act on behalf of Professional Clients and Eligible Counterparties.

The Firm is categorised as a IFPRU €50,000 Limited License firm by the FCA for capital purposes. The Firm is not a member of a group for FCA reporting purposes and therefore is not subject to consolidated reporting for prudential purposes.


The Firm makes Pillar 3 disclosures annually as at the Accounting Reference Date (‘ARD’).


Capital Requirements Regulation (“CRR”) and Capital Requirements Directive (collectively known as “CRD IV”) require firms subject to this Regulation to disclose certain information. CRDIV/CRR is underpinned by three “Pillars”:

Pillar 1: sets the Minimum Own Funds Requirement that a firm is required to hold at all times. In the case of EthicalFin Limited (“the Firm”) this is the highest value of €50,000, the sum of Market Position Risk Own Funds Requirement and Credit Risk Own Funds Requirement, and its Fixed Overhead requirement.

Pillar 2: requires each firm to review and assess whether its Own Funds are adequate to meet the impact of it risks or whether additional capital should be held against (i) risks not covered in Pillar 1 or (ii) a risk profile that deviates from that assumed by the FCA when setting Pillar I capital requirements. Here principal risk mitigants are the systems and controls employed by the firm to control risk. Additional capital requirements only need to be assessed to the extent that these controls are ineffective in controlling the risk.

Pillar 3: requires disclosure of specified information about the underlying risk management controls and capital position.

The rules in IFPRU 11 set out the provision for Pillar 3 disclosure and this document is designed to meet our Pillar 3 obligations.  An IFPRU Firm is permitted to omit required disclosures if it believes that the information is immaterial such that omission would be unlikely to change or influence the decision of a reader relying on that information.

In addition an IFPRU Firm may omit required disclosures where it believes that the information is regarded as proprietary information is that which, if it were shared, would undermine EthicalFin’s competitive position. Information is considered to be confidential where there are obligations binding EthicalFin to confidentiality with its clients, service providers and counterparties. EthicalFin has omitted no disclosures in reliance on a belief that any information is proprietary or confidential.


In addition to determining the Firm’s business strategy, the Directors of the Firm are responsible for designing and implementing a risk management framework that recognises and addresses potential Firm risks. They also determine how those risks may be mitigated and assess on an on-going basis how to manage those risks. The Directors meets on a regular basis to discuss current projections for profitability and capital management, business planning and risk management. The Firm’s risks are managed through a framework of policies and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules). These policies and procedures are updated as required.

Most of the Firm’s risk management efforts are focused on operational and foreign exchange risk. Based on the risk assessment, internal controls are evaluated for adequacy and effectiveness in managing identified risks.

As a corporate finance advisory firm, the Company’s approach to managing risks are shown below.

Interest rate risk: The Company's financial assets are not materially exposed to interest rate risk.

Business Risk:  From a very general standpoint, business risk arises when a firm is unable to realise its business plan and achieve its strategy targets due to changes in the external environment. The Firm runs at a low cost base to risk represents a potential decline in assets under management or the loss of key staff, which may reduce the fee income earned by the Company and hinder its ability to finance its operations and reimburse its expenses.  Business and market risks are assessed and mitigated as part of the Internal Capital Adequacy Assessment Process (‘ICAAP’).

Operational Risk: This risk covers a range of operational exposures and is inherent in all businesses, defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Legal and reputational risk are also included with the category of operational risk. Operational risks and mitigants are assessed as part of the ICAAP. The Firm seeks to mitigate all operational risks to acceptable levels, in accordance with its Risk appetite by maintaining a strong control environment, by ensuring that staff have appropriate skills and training and by establishing and effective and efficient management structure. The Directors consider that the Firm’s arrangements for monitoring, recording and mitigating operational risk to be appropriate to the size, nature and complexity of the business.

Credit Risk: Credit risk is defined as the risk of loss caused by the failure of a counterparty to perform its contractual obligations. As an advisory firm the Board consider that the key financial risk exposures faced by the Company relate to risk of non-payment of fees and the need to maintain sufficient liquidity to satisfy regulatory capital requirements and working capital needs. The Board therefore attempt to minimise the risk through having clearly defined terms of business with counterparties and stringent credit control over transactions with them.   

Market Risk: Market risk is the risk of any impact upon the Company’s financial condition due to fluctuations in values of, or income from, assets or in interest or exchange rates. The Company does not take positions which materially expose it to market riskThe Firm does not have a Trading Book. The main potential exposures are Non-Trading Book Exposures, i.e. to foreign currency held on deposit and assets or liabilities denominated in foreign currency, such as debtors, on the Firm’s balance sheet.  Foreign Exchange risk is monitored on an ongoing basis. Market risk is assessed and mitigated as part of the Internal Capital Adequacy Assessment Process (‘ICAAP’). This includes stress testing which is conducted on an ongoing basis.

Foreign Currency Risk: The Company's potential risk arises on its exposures to Euros. The Company's income can, in part, be generated by this currency. The Board is responsible for managing the Company's risk to foreign currency by monitoring the exposure on all foreign currency denominated assets and liabilities. The Board take a prudent approach by holding a healthy level of liquid resources to mitigate any significant fluctuations in the applicable exchange rates.

Liquidity Risk: Liquidity risk is defined as the risk that the Company, although solvent, either does not have sufficient available resources to enable it to meet its obligations as they fall due or can secure them only at excessive cost. The Board regularly monitor cash flow and management accounts to ensure regulatory capital requirements are not breached and that the Company maintains adequate working capital.

The Firm remains subject to the FCA’s Liquidity Rules at BIPRU 12, as an IFPRU Firm. The Firm is subject to the Overall Liquidity Adequacy Rule (BIPRU 12.2.1), however as it is classified as a Non-ILAS Firm, it is exempt from BIPRU 12.5 to 12.7 and BIPRU 12.9. Hence, EthicalFin has in place Liquidity Systems and Controls, which include the management of liquidity risk via scenario and stress testing of the Firm’s Cash Flow Forecast and the establishment of management actions and contingency funding plans. These Liquidity Systems and Controls and a “Liquidity Risk Tolerance” under BIPRU 12.3.8R are set out in the Firm’s “Liquidity Risk Management Framework and Policy”. The Firm is also obliged, because of SUP 16.12, to report annually to the FCA that it has adequate “Liquidity Systems and Controls”. This is undertaken via GABRIEL using Data Item FSA055.


Pillar 1 requirement:

The Company is classified for regulatory and capital purposes as an IFPRU €50,000 limited licence firm and as such its capital requirement is the greater of:

  1. Its base capital requirement of equivalent to EUR50,000 (£43,700);
  2. Variable Capital (sum of the credit risk capital requirement and the market risk capital requirement which is £40,000; and
  3. the Fixed Overheads Requirement (‘FOR’) which as at 31 December 2017 is £35,320.

The Company’ Pilar 1 capital currently comprises ordinary share capital and retained profits. The Company’s Pillar 1 requirement is determined by its compliance specialist based on the management accounts prepared by the Company’s accountants.

The Company's capital falls into Tier 1 capital as defined by GENPRU. It does not currently have any capital falling into any other Tier categories and there are no plans to issue financial instruments falling within these Tiers in the foreseeable future. The Company is capitalised at a level in excess of the minimum required regulatory level and the Board monitor management accounts and cash liquidity statements on a frequent basis to ensure that an adequate buffer of capital is maintained at all times.

Pillar 2 requirement:

The Company undertakes an annual Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP is a substantial report on the Company's business and risk environment. The ICAAP considers risk appetite, risk types, risk mitigants, a three-year scenario analysis and stress testing of those scenarios.

Given the nature of the Company's activities, the Company's capital requirement normally consists of the FOR, although market and credit risks are reviewed periodically in line with regulatory filing requirements.

The Company applies a standardised approach to credit and market risk, but as the risk is relatively small, it is the Board’s opinion that no additional capital is required in excess of its Pillar 1 capital requirement.

The ICAAP process also considers the impact on the Company in a theoretical ‘winding down’ scenario and whether additional capital is required, above and beyond the FOR, to mitigate the risk that the Company does not have sufficient resources to wind up the business in an orderly manner. Having assessed this unlikely scenario, the Board have determined that the capital required does not exceed the Company’s FOR.

The Company expects to maintain its capital position in excess of its FOR, for the foreseeable future.

The Firm’s capital is summarised as follows (latest available):

Capital Item £ £125,000
Core Tier 1 Capital: Share Capital and Audited Reserves £65,965
Total Capital Resources Requirement £43,700


The approach of the Company assessing the adequacy of its internal capital to support current and future activities is contained in the ICAAP. This process includes an assessment of the specific risks to the Company and the internal controls in place to mitigate those risks. Finally, an assessment is made of the probability of occurrence and the potential impact, in order to arrive at a level of required capital, as relevant. The Firm stress tests its forecasts by considering the impact of losing assets under management, its breakeven point, and order to address the worst case scenario, the costs to close.

The Company’s ICAAP is formally reviewed by the Directors approximately every 6 months, but will be revised should there be any material changes to the Company’s business or risk profile.


The Remuneration Code

The FCA, through CRDIV requires firms to disclose information on their remuneration policies and pay outs on an annual basis under the Pillar 3 disclosures. The Board is of the opinion that the Company follows remuneration policies and procedures that are consistent with the requirement of the Remuneration Code (‘Code’) and which do not promote or encourage undue risk taking. 

The rules of the Code are contained in the FCA's Remuneration Code located in the SYSC Sourcebook of the FCA's Handbook. The Code covers an individual's total remuneration, fixed and variable. The Company incentivises staff through a combination of the two. The Company's policy is designed to ensure that it complies with the Code and that its compensation arrangements:

- are consistent with and promote sound and effective risk management;

- do not encourage excessive risk taking;

- include measures to avoid conflicts of interest; and

- are in line with the Company's business strategy, objectives, values and long-term interests.

The Company does not have a formal remuneration committee as it is not required to establish one under the proportionality principles of the Code.

Under the Code, the Firm is in the lowest risk category as the Firm does not manage or trade propriety positions. This means that the Firm can dis-apply many of the technical requirements of the Code and proportionately apply the Code’s rules and principles.


Enshrined in the European remuneration provisions is the principle of proportionality. The FCA has sought to apply proportionality in the first instance by categorising firms into 3 levels. The Company falls within FCA proportionality Level 3 and as such this disclosure is made in line with the requirements for a Level 3 Firm.

Application of the requirements

Company directors and senior management are considered to be Code Staff as defined by the FCA. The total gross compensation paid to Code Staff during the financial year ended 31 December 2017 was £0.

The Firm’s policy is determined by the Board of the Firm.

Link between Pay and Performance

Remuneration subject to the Code is based on an assessment of the profitability of the Firm, an individual’s performance and their ability to influence the business carried on by the Firm.

In addition to salary, staff may be incentivised with the opportunity of receiving a discretionary bonus subject to the discretion of the Board.