Pillar 3 Disclosure


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 both regimes, and this disclosure specifically covers Pillar 3:

The former FCA framework encompassed 3 Pillars:

  • Pillar 1 sets out the minimum capital requirements that companies need to retain to meet their credit, market and operational risk;
  • Pillar 2 requires companies to assess whether their Pillar 1 capital is adequate to meet their risks and is subject to annual review by the FCA;
  • Pillar 3 requires companies to develop a set of disclosures which will allow market participants to assess key information about its underlying risks, risk management controls and capital position. These disclosures are seen as complimentary to Pillar 1 and Pillar 2.

Formerly, Rule 11 of BIPRU set out the provisions for Pillar 3 disclosure. The rules provide that companies may omit one or more of the required disclosures if such omission is regarded as immaterial. Information is considered material if its omission or misstatement could change or influence the decision of a user relying on the information. In addition, companies may also omit one or more of the required disclosures where such information is regarded as proprietary or confidential. The Firm believes that the disclosure of this document meets the disclosure obligation with respect to Pillar 3.

Firm Overview

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 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.

Pillar 1 & 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:


Formerly, a CPMI firm was required to maintain ‘own funds’ which equal or exceed the higher of:

  • Funds under management requirement of €125,000 plus 0.02% of the AIF AUM exceeding €250,000,000;
  • The sum of its market and credit risk requirements; or
  • Own funds based on its Fixed Overhead Requirement (which is essentially 25% of the firm’s fixed overheads determined in accordance with MIFIDPRU 4.5 expenses less certain variable costs);
  • Plus PII Capital requirement based on the excess for professional liability risk.

As at 31st March 2022, the Firm’s Pillar 1 capital requirement was £1,731,180.23

Pillar 2 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 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.

Risk Management

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.

Operational Risk

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.

Credit Risk

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, the Firm has had adopted the standardised approach to credit risk, and therefore follows adopted the provision within BIPRU 3 standardised credit risk of the FCA handbook. The Firm applies applied a credit risk capital component of 8% to its non-trading book risk weighted exposure. As the Firm does 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
Funds Under Management Requirement (a) 1,151,792
Capital  2,800,067.00
Fixed Overheads Requirement (FOR) (b) 1,693,180.23
Own Funds (OFR)1 2,165,878.18
Overall Financial Adequacy Rule (OFAR)2 564,393.41
Own Funds Wind-Down Trigger3 1,693, 180.23
Liquid Assets  1,787,394.24 
Liquid Assets Wind-Down Trigger4 564,393.41
PII Requirement (c ) 30,000
Total Capital requirements (a) or (b) plus (c) 1,723,180.23
Surplus/Deficit  1,076,886.77


Market Risk

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) £1,101,335.19

Remuneration Disclosures

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 process with quantitative and qualitative factors. Sona has a low risk profile level as evidenced through various internal risk evaluation measures 

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 (“Code Staff”).

The Firm will monitor the fixed to variable compensation to ensure SYSC 19 provisions 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 contact: Icolquhoun@sona-am.com

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,
Mayfair, London,

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.

The FOS can be contacted at:
Email: complaint.info@financial-ombudsman.org.uk
Website: www.financial-ombudsman.org.uk


OFR1 – The amount of own funds that a firm would need to hold to ensure that the firm can be wound down in an orderly manner

 OFAR2– To comply with the overall financial adequacy rule,  a firm must hold the higher of own funds that tie firm required at any given point tin time or the amount of own funds the firm would need to hold to ensure the firm can be wound down in an orderly manner

Own Funds Wind-Down Trigger3 – Is the fixed overheads requirement (FOR)

Liquid Assets Wind-down Trigger4 – Base liquid assets requirement, which is a third of the fixed overheads requirement (FOR)

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