Sona Asset Management (UK) LLP (“Sona” or the “Firm”) is required by the FCA to disclose information relating to the capital it holds and each material category of risk or harm it faces to assist users of its accounts and to encourage market discipline.
As at 31 December 2021, the Firm was subject to rules and guidance provided in the General Prudential Sourcebook (GENPRU) for Banks, Building Societies and Investments Firms (BIPRU) and fell within the Capital Requirements Directive (CRD) which created a revised regulatory capital framework across Europe covering how much capital financial services firms must retain.
Since 1st January 2022, the Firm became in-scope of the new FCA Investment Firms Prudential Regime (IFPR) and the related rules set forth in the FCA MIFIDPRU rules, the prudential sourcebook for MiFID investment firms. The Firm falls within the category of a Small Non-Interconnected (SNI) Firm under the new regime.
The Firm is therefore providing relevant disclosures pursuant to the new IFPR regime and the Firm believes that the disclosure of this document meets the disclosure set forth in MIFIDPRU 8 and reflecting appropriate transitional provisions:
Sona is incorporated in the UK and is authorised and regulated by the FCA as a Full Scope Alternative Investment Fund Manager and is categorized by the FCA for prudential regulatory purposes both as a Collective Portfolio Management Firm (“CPMI”) and formerly a BIPRU firm and from 1st January 2022, a SNI MIFIDPRU Investment Firm.
The Governing Body of the Firm has the daily management and oversight responsibility. It generally meets quarterly and is composed of:
- John Aylward
- Iain Colquhoun
- John Paul (JP) Berkery
- Justin Tamaye
- Antonio Di Flumeri
- Albert Marino
The Governing Body is responsible for the entire process of risk management, as well as forming its own opinion on the effectiveness of the process. In addition, the Governing Body decides Sona’s risk appetite or tolerance for risk and ensures that the Firm has implemented an effective, ongoing process to identify risks, to measure its potential impact and then to ensure that such risks are actively managed. Senior Management is accountable to the Governing Body for designing, implementing and monitoring the process of risk management and implementing it into the day-to-day business activities of Sona.
Capital Resources and Requirements
Sona was authorised by the FCA on 07/12/2018 and holds regulatory capital resources of £2,800,067 comprised solely of core Tier 1 capital.
The Firm has calculated its capital resources as follows:
As a SNI firm, the firm must always maintain ‘own funds’ that are at least equal to its ‘own funds requirement, which is the higher of:
Fixed Overhead Requirement being an amount equal to one quarter of the relevant expenditure in the previous year.
The Firm must also hold an amount of core liquid assets that is at least equal to the sum of
The Firm’s capital does not include Additional Tier 1 (AT1) instruments.
Capital Requirement & ICARA Assessment
As a former BIPRU Firm, the Firm had adopted the “Structured” approach to the calculation of its Pillar 2 Minimum Capital Requirement as outlined in the Committee of European Banking Supervisors Paper, 27 March 2006 which takes the higher of Pillar 1 and 2 as the ICAAP capital requirement. It has assessed Business Risks by modeling the effect on its capital planning forecasts and assessed Operational Risk by considering if Pillar 2 capital is required taking into account the adequacy of its mitigation.
Since the Firm’s assessment of capital adequacy pursuant to the Internal Capital and Risk Assessment (ICARA) process, (replacing the former Internal Capital Adequacy Assessment Process (ICAAP) which takes into consideration harm, wind down stress and scenario assessments), it has not identified capital to be held over and above the former Pillar 1 requirements, the capital resources detailed above are considered adequate to continue to finance the Firm over the next year. No additional capital injections are considered necessary and the Firm expects to continue to be profitable.
The Firm has established a risk management process in order to ensure that it has effective systems and controls in place to identify, monitor and manage risks arising in the business. The risk management process is overseen by the Firm’s members.
As risks are identified within the business, appropriate controls are put in place to mitigate these and compliance with them is monitored on a regular basis. The frequency of monitoring in respect of each risk area is determined by the significance of the risk.
The Firm does not intend to take any risks with its own capital and ensures that risk taken within the portfolios that it provides advice to is closely monitored. The results of the compliance monitoring performed is reported to the partners by the Compliance Officer.
The Firm places strong reliance on the operational procedures and controls that it has in place in order to mitigate risk and seeks to ensure that all personnel are aware of their responsibilities in this respect.
The Firm has identified a number of key operational risks. These relate to disruption of the office facilities, system failures, cyber security considerations, trade failures and failure of third party service providers. Appropriate policies are in place to mitigate against risks, including appropriate insurance policies and business continuity plans.
The main credit risk to which the Firm is exposed is in respect to the failure of its debtors to meet their contractual obligations. The majority of the Firm’s receivable is related to investment management activities. The Firm believes its credit risk exposure is limited since the Firm’s revenue is ultimately related to management fees received from funds. These management fees are drawn throughout the year from the funds managed. Other credit exposures include bank deposits and office rental deposits.
The Firm undertakes periodic impairment reviews of its receivables. All amounts due to the Firm are current and none have been overdue during the year. As such, due to the low risk of non-payment from its counterparties, management is of the opinion that no provision is necessary. A financial asset is overdue when the counterparty has failed to make a payment when contractually due. Impairment is defined as a reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount.
As a former BIPRU, the Firm, had adopted the standardised approach to credit risk, and therefore adopted the provision within BIPRU 3 standardised credit risk of the FCA handbook. The Firmapplied a credit risk capital component of 8% to its non-trading book risk weighted exposure. As the Firm did not make use of an external credit rating agency, it is obligated to use a risk weight of 100% to all non-trading book credit exposures, except cash and cash equivalents which are held by investment grade firms and currently attract a risk weighting of 20%.
The table below sets forth the Firm’s credit exposures and corresponding capital resource requirements as at the date of its current ICARA assessment:
|Across the business
|MiFID Business (Subject to MiFIDPRU)
|Funds Under Management Requirement (a)
|Fixed Overheads Requirement (FOR) (b)
|Own Funds (OFR) 1
|Overall Financial Adequacy Rule (OFAR) 2
|Own Funds Wind-Down Trigger3
|Liquid Assets Wind-down Trigger4
|PII Requirement (c )
|Total Capital requirements (a) or (b) plus (c)
The Firm’s bank accounts are in GBP and USD and therefore the Firm has some exposure to foreign currency risk.
Market Risk Capital Component (8% of risk weighted exposure) £407,494.02
The Firm has adopted a remuneration policy and procedures that comply with the requirements of MiFIDPRU and SYSC 19. The Firm has considered qualitative, quantitative and all the proportionality elements in line with the FCA Guidance.
Remuneration is designed to ensure that the firm does not encourage excessive risk taking and staff interests are aligned with those of the clients.
The Firm has a strict risk management with quantitative and qualitative factors. Sona has a low risk profile level as evidenced through various internal risk evaluation measures
Further to MIFIDPRU 8.6.2(3)(a)the Governing Body, as the Remuneration Committee, is directly responsible for the overall remuneration policy which is reviewed annually. Variable remuneration is adjusted in line with capital and liquidity requirements as well as the Firm’s performance. The Governing Body will review the remuneration strategy on an annual basis together with the Remuneration
The Firm’s remuneration is offered as fixed and variable in line with SYSC 19 and MIFIDPRU
Pursuant to MIFIDPRU 8.6.8(2) the total amount of remuneration awarded to staff in the reporting period was £29,766,580
The Firm will monitor the fixed to variable compensation to ensure SYSC 19 and the provisions of MIFIDPRU are adhered to with respect to Total Compensation where applicable.
The Firm ensures that its remuneration structure promotes effective risk management and balances the fixed and variable remuneration components for all Code and Non-Code staff. Total Remuneration is based on balancing both financial and non-financial indicators together with the performance of the Firm and the staff member’s business unit.
Sona Asset Management (UK) LLP is a limited liability partnership registered in England and Wales under number 814191.
Authorised and regulated by the Financial Conduct Authority. © 2022
Sona Asset Management (UK) LLP complaints handling procedure is in line with Financial Conduct Authority’s rules regarding complaints handling. A copy of the Complaints Policy is available upon request, please
Complaints may be made to Sona Asset Management (UK) LLP by the following means:
By email: Icolquhoun@sona-am.com
In writing, addressed to:
20 St James’s Street,
A complainant may also be entitled to refer their complaint to the Financial Ombudsman Service (“FOS”). The FOS is a UK agency for arbitrating on complaints between regulated firms and their clients. More information can be found in the Complaints Policy.