This remuneration policy sets out the legal and regulatory requirements which Audentia Capital Management Limited (the “Company”) complies with in order to meet its obligations in the area of remuneration as an Alternative Investment Manager licensed by the Malta Financial Services Authority (“MFSA”).
This Remuneration Policy is aimed at ensuring that any relevant conflicts of interest can be managed appropriately at all times and sets out practices for those categories of staff, including senior management, risk takers, control functions, and any employees receiving total remuneration that places them in the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the risk profile of the Company or a Fund. The policy ensures these practices are consistent with and promote sound and effective risk management and do not encourage risk-taking that is inconsistent with the risk profiles, rules, or instruments of incorporation of the Company or any relevant Fund.
In the event of any conflict between this policy and local laws and regulations, the latter shall prevail to the extent of the conflict. Any discrepancies in standards shall entail the application of the more stringent.
The policy covers remuneration paid in exchange for professional services rendered by the Company’s Identified Staff (as defined further below), consisting of one or more of the following:
Remuneration can be divided into fixed remuneration (payments or benefits without consideration of any performance criteria) or variable remuneration (additional payments or benefits depending on performance or, in certain cases, other contractual criteria).
The policy covers the remuneration which is paid in exchange for professional services rendered by the Company’s Identified Staff (as defined further below), and which consists of one or more of the following:
Remuneration can be divided into fixed remuneration (payments or benefits without consideration of any performance criteria) or variable remuneration (additional payments or benefits depending on performance or, in certain cases, other contractual criteria).
The Company has drawn up this Remuneration Policy in line with the applicable provisions on remuneration as set out in:
| Maltese Law | Investment Services Act, Cap. 370 of the Laws of Malta |
| EU Directive | No. 2011/61/EU |
| No. 2019/2088 | |
| ESMA Guidelines | No. 2016/411 – Final report on guidelines on sound remuneration policies under the UCITS directive and AIFMD |
| No. 2013/232 Guidelines on sound remuneration policies under the AIFMD | |
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MFSA |
Guidance notes on the application of Proportionality Principle in relation to the ESMA Guidelines on sound remuneration policies under the UCITS Directive and the AIFMD last updated 9/05/2017 |
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SFDR |
Regulation (EU) 2019/2088 relating to sustainability-related disclosures in the financial services sector, the remuneration policy should also include information on how remuneration is consistent with the integration of sustainability risks. |
The remuneration policy applies strictly to those categories of staff which are classified as Identified Staff.
The Company adopts the definition of Identified Staff in accordance with ESMA Guidelines: categories of staff, including senior management, risk takers, control functions, and any employee receiving total remuneration that places them in the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the Company’s risk profile (the “Identified Staff”).
The following is a current list, as of the date of this Remuneration Policy, of the Identified Staff of the Company. The Identified Staff have been determined and selected on the basis of their categories, in line with the ESMA Guidelines:
| Category | Identified Staff | |
|---|---|---|
|
Board of Directors | |
| Control Functions |
|
|
| Senior Management | Spanish Branch Manager | |
| Other Risk Takers |
|
The Compliance Officer maintains a register of all staff members which fall within the category of Identified Staff
The Company complies with the remuneration requirements in a way and to the extent that is appropriate, based on its size, internal organisation, and the nature, scope, and complexity of its activities.
The Company has been granted a derogation from the MFSA, based on the principles of proportionality, and as foreseen in the ESMA Guidelines, from the following requirements:
The Company shall re-assess the proportionality principles on a regular basis, at least annually, and re-submit the results of the proportionality assessment to the MFSA at least every two years. This assessment will indicate whether such derogations remain appropriate.
The Board of Directors, in its supervisory function, has adopted and periodically reviews the general principles of this Remuneration Policy and is responsible for its proper implementation.
The Remuneration Policy will be reviewed by the Board of Directors at least annually as part of the annual review of the Company’s liquidity and risk management assessments. The Company has not established a Remuneration Committee pursuant to the exemption based on the proportionality principle applicable in terms of the ESMA Guideline.
The Control Functions assist in determining the overall remuneration strategy of the Company to promote effective risk management. The Control Functions will be closely involved in reviewing the remuneration system.
The risk management function assesses how remuneration, particularly the variable remuneration structure, affects the risk profile of the Company, with a focus on capital and liquidity requirements.
The compliance function has been involved in the elaboration of this Remuneration Policy and will assess the adherence by the Company to applicable legislation, regulation, and internal policy.
Fixed and variable components of total remuneration must be appropriately balanced. The fixed component must represent a sufficiently high proportion of the total remuneration to allow for a fully flexible policy on variable remuneration, including the possibility of not paying a variable remuneration component.
In determining the appropriate ratio between base and variable remuneration, the Company will consider:
– Base Remuneration
The fixed remuneration is determined based on the role of the individual employee, including responsibilities, job complexity, performance, and local market conditions. Fixed remuneration must be sufficiently high on its own to constitute fair remuneration for the services rendered by prevailing market standards.
Performance reviews may lead to an increase in fixed remuneration based on the achievement of agreed targets and/or higher salaries justified by an increased level of responsibility or other criteria determined by the Company.
When remuneration includes a variable element, it shall be performance-based and risk-adjusted. The variable remuneration should be reasonable and structured to achieve a fair balance between fixed and variable elements, in line with the business strategy, market conditions, and the specific environment in which the Company operates. The maximum limit of variable remuneration should, in principle, not exceed fixed remuneration.
Variable remuneration must not be paid through vehicles or methods that facilitate the avoidance of the Remuneration Provisions.
There is no commitment to pay variable remuneration to employees of the Company.
The Company shall not enter into agreements to pay guaranteed variable remuneration, except in exceptional cases, such as during the hiring of staff, and limited to the first year of service.
Any remuneration package related to compensation or buyouts from an employee’s contracts in previous employment shall be aligned with the long-term interests of the Company and be subject to the employee meeting specified objectives.
In exceptional circumstances, the Company may offer key members of staff a one-off retention award. Any decision to offer such a payment must be approved by the Board of Directors and will only be made on prudential grounds.
The Company ensures that individuals are not remunerated for exceeding the risk tolerances of the Company or the CISs under management.
In establishing the Company’s top-down remuneration framework, the Board of Directors will take into account:
While each of these criteria shall be considered, variable remuneration shall primarily depend on the attainment of function-specific objectives.
The appropriate mix of quantitative (financial) and qualitative (non-financial) criteria for assessing individual performance will depend on the tasks and responsibilities of the Identified Staff. A balance between financial and non-financial criteria will be sought.
Poor performance in relation to the non-financial criteria may pose a threat to the Company, and hence the negative non-financial performance, in particular, unethical or non-complaint behaviour, will override any good financial performance generated by the individual and hence reduce the entitlement for variable remuneration.
In order to incentivise Identified Staff to manage risk appropriately, variable remuneration will be reduced when:
By way of examples:
The Company’s qualitative criteria could include:
Measures relating to conduct should comprise a substantial portion of non-financial criteria. Quantitative measures could include:
On the other hand, quantitative measures such as Return on Equity, Total Shareholder Return and Earnings Per Share are not suitably adjusted for longer-term risk factors and tend to incentivise highly leveraged activities.
The Company seeks to ensure that individuals involved in Control Functions remain independent from the business areas they oversee to avoid any potential conflicts of interest. The remuneration level of those in the Control Functions should allow the Company to employ qualified and experienced individuals in these functions.
In view that the Company has not established a Remuneration Committee on the basis of proportionality, the remuneration attributed to the Control Functions is directly overseen by the Board of Directors.
In order to prevent and/or avoid conflict of interest, the remuneration of those in the Control Functions shall be determined in accordance with the achievement of function-specific objectives, which are linked to their functions and independent of the business areas that they oversee.
The remuneration of the Control Functions shall be linked to the Company’s adherence to its risk profile, provided that any discretionary bonuses to the Control Functions shall be determined primarily by the attainment of their function-specific objectives and shall not be determined solely to the Company-wide performance criteria.
The Company calculates its ongoing capital requirements through its Interim Financial Return (IFR) and Annual Financial Return (AFR), reviewed periodically by the Board of Directors. In coordination with this review, the Board determines the size of variable remuneration based on the assessment of each Identified Staff member, taking into consideration:
It is important to ensure that the Company maintains a prudent balance between sound financial situation and the reward, pay out or vesting of variable remuneration. The financial health of the Company should not be adversely affected by:
The Company ensures that any payment of variable remuneration only occurs following risk adjustments to profits and where the Company is not at risk of being unable to maintain a sound capital base.
The maximum annual variable remuneration that may collectively be paid to Identified Staff shall be the Company’s profit for the preceding year less any amounts determined by the Board of Directors to be held as a reserve (the “Variable Remuneration Pool”). Any reserves established shall be to strengthen the Company’s capital base, taking into consideration the various risks to which the Company and its CISs under management are exposed (as outlined in greater detail in the Company’s Risk Management Policy) and other potential adverse developments that may impact the Company’s financial stability.
The Board of Directors may determine to disburse the entire Variable Remuneration Pool or none of it. Similarly, the Board may, at its sole discretion, decide not to award variable remuneration to any member of Identified Staff where it feels this is not justified.
The Sustainable Finance Disclosure Regulation (SFDR) requires the Company to outline in this Policy how it integrates sustainability risks into its decision-making process and aligns its remuneration structure accordingly.
As previously stated, no variable remuneration will be awarded to Identified Staff unless it is deemed justified by the Board of Directors, following a performance assessment that considers both quantitative (financial) and qualitative (non-financial) criteria. Given the limited impact of variable remuneration on the risk profile of the Collective Investment Schemes (CISs) and the nature of the Company’s business, it is assessed that there is no risk of misalignment with the integration of sustainability risks in the investment decision-making process for the CISs.
In the event that the Company delegates portfolio management to a third-party investment manager (the “Delegate”), the Delegate shall ensure that its remuneration policies and procedures are consistent with the integration of sustainability risks, provided that sustainability risks are incorporated into the investment decision-making process. The Company will seek periodic confirmations from each Delegate to verify compliance with these policies, ensuring that their remuneration structures do not encourage excessive risk-taking in relation to sustainability risks. Remuneration will be aligned with risk-adjusted performance.
The Company is confident that, when portfolio management is retained, its existing governance and remuneration structures are sufficient to mitigate the risk of excessive risk-taking with respect to sustainability risks.
This Remuneration Policy is designed to effectively mitigate potential conflicts of interest.
To further address any conflicts that may arise, the Board of Directors has adopted a Conflict of Interest Policy. This policy focuses on managing conflicts between the Company’s officials and clients, between officials and the Company, and between clients themselves. The Company also maintains a conflict of interest register, which identifies any remuneration-related conflicts and outlines the procedures implemented to mitigate such conflicts.
The Company will comply with the remuneration disclosure requirements set out in the AIFMD.
Additionally, the Company will provide information on how this Remuneration Policy aligns with the integration of sustainability risks and will make this information publicly available on its website.
A copy of this Policy, including any amendments, will be accessible on the Company’s website at www.audentiacapital.eu. A printed copy of the Policy can also be requested from the Company free of charge.
The total remuneration paid by the Company to Identified Staff for each full performance year, broken down into fixed and variable components (if applicable), will be disclosed in the Company’s annual report.
The Board of Directors is responsible for initiating and overseeing an annual review of the Remuneration Policy and its implementation. This review will assess whether the overall remuneration framework is:
Based on a proportionality assessment, the Board may decide to outsource the review to an independent external consultant, such as the Company’s legal counsel or auditor. Regardless of whether the review is conducted internally or externally, the Board retains ultimate responsibility for overseeing the review and ensuring that its findings are appropriately addressed. The relevant control functions should also be actively involved in the review process.
The results of the annual review, along with any recommendations, will be presented to the Board, which will promptly assess the findings, take necessary action on any recommendations, and make any appropriate amendments to the Remuneration Policy. Any changes or material deviations from the Remuneration Policy must be approved by the Board, following consultation with the Control Functions, whether arising from the annual review or otherwise.