Tatton Investment Management Limited (Tatton) is authorised & regulated by the Financial Conduct Authority. Firm Reference Number 733471. The company is incorporated in England & Wales Company Number 08219008. This document describes Tatton’s responsibilities for, and approach to:
- Treating Customers Fairly
- Handling Complaints
- Order Execution Policy
- Conflicts of Interest
- Gifts & Benefits Policy
- Financial Resource Requirements – Pillar 3 Disclosure
- Remuneration Policy
1. Treating Customers Fairly (“TCF”)
Treating our clients fairly is at the heart of our business. We always aim to put our clients’ interests above our own and this message is directed and endorsed by the Tatton Board.
Our regulator, the Financial Conduct Authority (FCA), sets down principles for the businesses it regulates. Tatton fully supports the FCA principle that firms ‘must pay due regard to the interests of their customers and treat them fairly’. We do this by making sure that:
- Our clients clearly understand the nature of the services we provide. All clients at the onboarding stage are given and asked to sign a Discretionary Management Agreement which sets out the terms and conditions of the Tatton service and the responsibilities of Tatton as well as those of their appointed Financial Adviser and selected Platform.
- We communicate with our clients in an open, transparent, and easily understandable manner.
- We ensure that the portfolio/s we manage for our clients have been chosen by the client in conjunction with their Financial Adviser.
- We will only provide those services which we are able and equipped to deliver.
- The Tatton Board leads by example, setting a ‘tone from the top’ that the fair treatment of clients is central to our corporate culture.
- All Tatton staff are competent to fulfil their roles. We provide them with training and supervise them properly.
- We have a transparent, impartial, and accessible complaint-handling process.
- We monitor and measure how well we treat our clients and, if things go wrong, we put them right.
2. Handling Complaints
We hope you won’t have cause to complain, but if you are unhappy with something we have, or haven’t done then please tell us. By letting us know you are unhappy you give us the opportunity to put matters right for you and to improve our services for all our clients.
You can contact us by:
Letter – please address it to:
The Head of Compliance, Tatton Investment Management Limited, Head of Compliance17 St Swithin’s Lane, London EC4N 8AL
Telephone: 020 7139 1470
Email: [email protected]
Or in person at our offices.
Whichever way you choose to contact us please be assured that we will:
- Provide you with a summary of our internal complaints process when we write to acknowledge your complaint or if you request one from us.
- Contact you promptly to let you know that we are looking into your concerns and give you an indication of when you can expect to hear from us again.
- Keep you regularly updated and, if it looks like our investigation may take more than eight weeks from when you first contacted us, we will write to you with an update.
- Consider your complaint thoroughly and, once our investigations are complete, we will send you a final written response setting out what we have found and what our decision is / what we propose to do; and,
- Inform you of your right to refer the matter to the Financial Ombudsman Service.
Sometimes a concern may not be about our service. If this is the case, we will pass it on to the correct party and give you full details.
Please contact us if you would like a copy of our complaints handling procedures.
3. Order Execution Policy
This Order Execution Policy sets out the approach that Tatton Investment Management Limited (Tatton) take to achieve the best possible result for our investors. We treat all investors with honesty, fairness, and professionalism and always in their best interests.
All Tatton clients are classified as retails clients for achieving best execution.
This policy should be read in conjunction with other contractual information.
This document provides information about our Order Execution Policy as required by the Market in Financial Instruments Directive (MiFID and MiFID II) and the Financial Conduct Authority (FCA) under COBS 11.2A.22R.
This policy is available directly from us upon request or online at: https://tattoninvestments.com/order-execution-policy/
Our responsibility for best execution applies when we are:
- Executing an order in a financial instrument or
- Transmitting an order in a financial instrument to another party for execution during:
- Portfolio management
- Investment activities as an investment manager of an undertaking for collective investments in transferable securities (‘UCITS Fund’);
- Investment activities as an alternative investment fund manager and
- Carrying out an order provided by an investor.
Financial instruments include:
- Shares in companies, securitised debt and bonds, warrants, options, futures and convertible bonds, securitised cash settled derivatives and shares in investment trusts.
- Money Market instruments
- Units or shares in alternative investment funds and UCITS Funds
- Certain options, futures, swaps and forward rate agreements (including foreign exchange forward transactions);
- Derivative instruments for transferring credit risk; and
- Financial contracts for difference and structured products.
Due to the nature of our business, orders are typically generated by investments, disinvestments or an adjustment to the investments selected by the Tatton investment team.
Order execution factors
Tatton aims to take all sufficient steps to obtain the best possible result for its clients on a consistent basis but relies on other FCA regulated parties for the execution of orders on your behalf, and where required will monitor their performance in relation to this.
This will include the following execution factors:
- speed of execution,
- speed of execution,
- likelihood of execution and settlement,
- size and nature of the order and
- any other consideration relevant to the execution of the order.
In transmitting an order to another party for execution, Tatton will place reliance on that other party. This means Tatton’s best execution obligation will have indirect application. Tatton annually reviews the governance of ‘other party’ execution policy to ensure they meet the regulated and Tatton standards.
Tatton – Model Portfolio Service
In its role as a discretionary investment portfolio manager offering a portfolio management service exclusively to clients who hold their investments through a UK adviser investment (wrap) platform, Tatton invests in Collective Investment Schemes (CIS). These are financial instruments so technically fall under the best execution requirements; however, the portfolio trades are in open ended funds and not exchange traded. Orders are usually arranged directly with a third-party product provider or their appointed administrator.
The CIS is the only venue in which to transact orders. An individual CIS will state in its prospectus the way subscriptions and / or redemptions can be purchased / made. This information will include how frequently liquidity will be provided, the time frames for the calculation of the net asset value and receiving orders. All orders will be executed directly with the CIS in question. All activities are undertaken per the requirements set out in the FCA Collective Investment Schemes (COLL) handbook.
All portfolios managed by us are held on UK adviser investment (wrap) platforms as Tatton is not permitted to hold or control client monies or assets.
In most instances, Tatton places its trading instruction(s) at the model portfolio level using the platform portfolio trading capability. Consequently, trade execution and custody of assets is entirely under the control of the respective platform and Tatton cannot be held responsible for any third- party failures.
Tatton – Funds
In its role as an investment manager of UK mutual funds, regulated by the FCA under the UK’s Non-UCITS Retail Scheme (NURS) rules, the FCA best execution requirements do apply.
In respect of the Tatton Oak, Tatton Blended and Sinfonia Fund Ranges we submit orders to Valu-Trac as Authorised Corporate Director and rely on their order execution policy.
Throughout the execution of orders Tatton cannot be held accountable for any third-party failures.
Tatton will ensure that it maintains the Financial Conduct Authority regulatory permissions required to permit trading as a Discretionary Fund Manager and will actively monitor compliance with its Order Execution Policy. We will regularly, and at a minimum, annually review the policy and notify you of any material changes.
Tatton – AIM portfolio
Tatton also offers an Alternative Investment Market (AIM) portfolio service to retail clients. The portfolios are held on UK adviser investment (wrap) platforms where trading takes place using the platforms preferred broker. Custody of assets is also arranged through the platform.
In most instances, Tatton places its trading instruction(s) at the model portfolio level using the platform portfolio trading capability. The platform will then send the aggregated instructions to its preferred broker who will action them according to the agreed and contractual (between platform and broker) Order Execution Policy. Consequently, Tatton is not directly responsible for the trading execution on client portfolios as it must adhere to, the platforms ‘Order Execution Policy’ for all the AIM trades. This responsibility is carried out by the relevant platform dealing desk from orders placed by Tatton.
Tatton will, during normal trading, give guidance pertaining to prices to the platform’s dealing desk in the form of limit orders and direct discussions with the dealing desk.
Tatton views best execution in a holistic way in the context of the whole portfolio and not purely on a single trade by trade basis. Best execution, in this context, can only be achieved through single bulk orders that are directed by Tatton due to the nature of certain trades, such as illiquidity. Single bulk orders will ensure the fair and equal treatment of all clients across all portfolios and platforms as well as limit unnecessary disruption across client portfolios.
Where Tatton, as the discretionary manager, initiates, and sources a transaction and directs the trade to the relevant dealing desk then the best execution duties will be transferred to Tatton and the best execution factors will be adhered to as set out below.
When orders are placed, the same execution factors as for funds and the model portfolio service are considered.
Tatton will generally give price a higher relative importance but will also consider the other execution factors noted above to obtain Best Execution which may not result in the best available price. Other considerations may include the liquidity of the market which may make it difficult to execute an order. Tatton cannot be held responsible for any failures in third parties or messaging infrastructure during the execution of orders.
Market abuse e.g. Front-Running is explicitly prohibited, and Tatton has a Personal Account Dealing policy in place to mitigate the risk of this activity occurring.
The AIM Investment Market is the only execution venue available for AIM stocks.
Tatton will actively monitor compliance with its Order Execution Policy which will be reviewed at least annually.
4. Conflicts of Interest
The European Securities and Markets Authority considers that since the introduction of MiFID the expanding range of investment activity has increased the potential for conflicts of interest (COI) between those different activities and the interests of their clients. Therefore, under MIFID II the steps firms need to take to prevent or manage COI and disclose appropriately has been enhanced.
COI is covered in detail in FCA Handbook SYSC Chapter 10.
What is a conflict of interest?
Broadly, a COI will entail “a risk of damage to the interests of a client”. In identifying a COI, firms must consider whether the firm or a person directly or indirectly linked by control to the firm:
(1) is likely to make a financial gain, or avoid a financial loss, at the expense of the client
(2) has an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of the client, which is distinct from the client’s interest in that outcome
(3) has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client
(4) carries on the same business as the client; or
(5) receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service.
Examples of a COI are when the business model of one firm has the potential to influence the actions taken by another individual or firm, for example, as the result of a direct or indirect financial interest or when a staff member has a business interest which is in direct competition with Tatton.
- Maintain a comprehensive COI policy available to all on its website at www.tattoninvestments.com as part of its Regulatory Disclosures Document. This document will be reviewed at least annually
- Maintain a detailed record of all COI and update the Tatton Board accordingly
- COI is an agenda point for all Tatton Board Meetings
- Take all appropriate steps to identify and to prevent or manage COI between:
- The firm, including its managers and employees or any person directly or indirectly linked to them by control, and a client of the firm; or
- One client of the firm and another client hat arise or may arise when the firm provides its service. This includes COI caused by the receipt of inducements from third parties or by the firm’s own remuneration and other incentive structures which may adversely affect the interests of its clients.
- If these arrangements are insufficient to ensure, with reasonable confidence, that risks of damage to the interests of a client will be prevented, Tatton will clearly disclose in detail the COI to the client in the Discretionary Management Agreement before any service is provided including,
- A specific description of the conflicts of interest that arise in the provision of investment services or ancillary services
- A statement confirming that the organisational and administrative arrangements Tatton has in place to prevent or manage that conflict are insufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented
- An explanation of the risks to the client that arise because of the COI; to enable the client to take an informed decision with respect to the service in the context of which the COI arises.
- Have effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a COI where the exchange of that information may harm the interests of one or more clients
- Ensure that its remuneration policy does not have a direct link between the remuneration of staff engaged in an activity on behalf of clients and the remuneration of staff engaged in another activity where a COI may arise in relation of those activities.
- Ensure that procedures are in place to manage effectively where any staff member is sequentially involved in services where this may affect the proper management of COI
- Ensure that measures are in place which will prevent or limit any person from exercising inappropriate influence over the way in which a member of staff carries out their role.
Procedure for disclosing and managing conflicts of interests
Tatton recognises that all staff are entitled to manage their own affairs in privacy. However, work must also be carried out in an environment that is free from any suggestion of improper influence.
All employees are required to disclose any other business interests they may have when they join the firm. These will be recorded on the firm’s application form. (All staff registered with FCA (Approved Persons) are subject to an annual “fit and proper” check which includes a review of other business interests).
It is the responsibility of each member of staff to bring potential or actual conflicts of interest to the attention of the Head of Compliance as soon as they become aware of them.
Tatton will ensure that if a Senior Manager, or any other of its employees who has a material interest in a transaction to be arranged, Tatton will not arrange or enter the arrangement unless it can be demonstrated that the firm has dealt with the Customer fairly.
All staff must adhere to the following procedure in cases where a potential COI exists:
- The staff member must advise the Head of Compliance of the potential COI in writing
- Tatton will advise the Customer, in writing, of the potential COI
- The Customer must provide Tatton with their consent to proceed, in writing
- A copy of both letters will be retained by the Head of Compliance who will authorise the transaction to proceed, and
- Copies of both letters, together with the Head of Compliances written authorisation to proceed must be retained as part of the audit trail.
The firm will maintain a COI register which will be kept under regular review. COI is an agenda item at the Tatton Board meeting.
Personal Account Dealing Rules
The market abuse regime was introduced in December 2001 and has been updated to take account of the requirements of the Market Abuse Directive. The main provisions of the regime are set out in the Financial Services and Markets Act 2000 (FSMA). FCA has set out in more detail the sorts of behaviour that may amount to market abuse in the Code of Market Conduct, which forms chapter 1 of the Market Conduct Sourcebook (MAR 1).
One of the categories of market abuse defined in FSMA is the misuse of information where that information is relevant and not generally available. It is an offence to deal based on such information and to require or encourage someone else to deal. One factor to be considered when assessing whether behaviour amounts to market abuse is whether the person concerned has acted in accordance with the standards expected of them given their position in relation to the market. Tatton expects all staff to observe the highest standards in relation to their personal dealings. The market abuse regime is a civil regime and, in cases where market abuse has occurred, the FCA can impose an unlimited financial penalty.
The UK also has a criminal insider dealing regime, which is set out in the Criminal Justice Act 1993 (the Act). This makes it a criminal offence for an individual who has information as an insider to deal in securities (including shares, debentures, warrants and options) on a regulated market. FCA may decide, in concluding investigations into a potential misuse of information or insider dealing case, that the behaviour is sufficiently serious to justify a criminal prosecution. An offence under the Act is punishable by a custodial sentence and/or a fine.
It is important that proper arrangements are in place, which allow Tatton and its employees to show that individual investment decisions have not been influenced by information made available to them, confidentially, in the course of its business.
Under the FCA “personal account dealing rules”, firms are required to monitor staff dealings in securities, derivatives and shares. The rules exclude units in collective investment schemes, life policies, endowments, pensions and some exchange traded funds which can be regarded as collectives. It is Tatton’s policy that any business conducted by a member of staff on their own account (excluding pensions and life policies) should be recorded on the firm’s personal account dealing register. Accordingly, all relevant staff dealings need to be notified to the Head of Compliance.
NB all dealings in AIM listed shares must be approved by CIO or Head of AIM Investment in his absence.
5.Gifts & Benefits Policy
Tatton requires that all staff are aware of our policy in respect of gifts and inducements which may constitute an offence under the Bribery Act.
The Money Laundering Reporting Officer (“MLRO“) is responsible for Anti Money laundering, Bribery and Corruption within Tatton, overseen jointly by the firm’s Directors.
The MLRO for Tatton is the Head of Compliance.
The FCA Rules on inducements, updated for MiFID II, set out three categories of benefits which may be paid or accepted from any party if paid or accepted in accordance with the FCA Rules. The three categories are as follows:
- Payments necessary for the provision of investment services
- Third party research received in accordance with the FCA rules; and
- Fee, commission, or non-monetary benefit.
Payments necessary for the provision of investment services
Any payment or benefit which enables or is necessary for the provision of investment services by Tatton, such as custody costs, settlement and exchange fees, regulatory levies or legal fees and which, by its nature, cannot give rise to conflicts with Tatton’s duty to act in the client’s best interests, shall not be considered an inducement under the FCA Rules.
Third party research
Any third-party research received by Tatton will be paid out of the firm’s own resources and therefore will not be considered an inducement under the FCA Rules.
Fee, commission, or non-monetary benefits
This Policy deals specifically with fees, commissions, or non-monetary benefits. It is Tatton’s policy not to pay or accept any: (a) fees or commissions; and (b) non-monetary benefits, unless the exclusion applies as per the below.
Tatton may pay or accept the benefit where it is:
- an acceptable minor non-monetary benefit (further explained below); or
- a fee or commission paid to or accepted, or non-monetary benefit provided to or received from the client or a person on behalf of the client in connection with the provision of the Tatton service.
At no time must a member of staff either accept or offer a gift, benefit or inducement to expedite work or to give or take advantage of a situation.
Notwithstanding the above, at no time must a member of staff pay or accept any fee, commission, or non-monetary benefit without first considering the section below titled ‘Items requiring authorisation prior to acceptance’.
Acceptable minor non-monetary benefits
Acceptable minor non-monetary benefits may be paid or received by Tatton as long as they are clearly disclosed, capable of enhancing the quality of service provided to a client, are of a scale and nature such that they could not be judged to impair compliance with Tattons duty to act in the best interest of the client, and reasonable, proportionate and of a scale that is unlikely to influence Tattons behaviour in any way that is detrimental to the interests of the client.
Therefore, where Tatton pays, provides, or accepts a minor non-monetary benefit in accordance with the FCA Rules, Tatton will inform the client, prior to the provision of the relevant service:
- Of the existence and nature of the minor non-monetary benefit (which Tatton may describe in a generic way);
- Where applicable, the mechanisms for transferring to the client the minor non-monetary benefit received in relation to the provision of the relevant service; and
- The amount of the minor non-monetary benefit or, where the amount cannot be ascertained, the method for calculating that amount. Where Tatton provides the method for calculating the amount, the client will be informed of the exact amount of the minor non-monetary benefit on an ex-post basis.
Where the minor non-monetary benefit is received by Tatton on an on-going basis in relation to an investment service provided to the client, Tatton will inform the client, at least annually, about the actual amount of minor non-monetary benefits received.
Tatton will provide the client with periodic reporting statements to inform the client regarding any minor non-monetary benefits transferred to the client.
Definition of a minor non-monetary benefit
An acceptable minor non-monetary benefit is one which:
- Is capable of enhancing the quality of service provided to the client
- Is of a scale and nature that it could not be judged to impair Tatton’s compliance with its duty to act honestly, fairly and professionally in the best interests of the client; and consists of Information or documentation relating to a financial instrument or an investment service ,that is generic in nature or personalised to reflect the circumstances of an individual client
- Written material from a third party that is commissioned and paid for by a corporate issuer or a potential issuer to promote a new issuance by the company, or where the third-party firm is contractually engaged and paid by the issuer to produce such material on an ongoing basis, provided that the relationship is clearly disclosed in the material and that the material is made available at the same time to any firms wishing to receive it or to the general public
- Participation in conferences, seminars and other training events on the benefits and features of a specific financial instrument or investment services
- Hospitality of a reasonable de minimis value, such as food and drink during a business meeting or a conference, seminar or other training events mentioned above
- Research relating to an issue of shares, debentures, warrants or certificates representing certain securities by an issuer which is produced prior to the issue being completed and by a person that is providing underwriting or placing services to the issue on that issue and is made available to prospective investors in the issue; or
- Research that is received so that Tatton may evaluate the research provider’s research services provided that:
- It is received during a trial period that lasts no longer than 3 months
- No monetary or non-monetary consideration is due (whether during the trial period, before or after) to the research provider for providing the research during the trial period
- The trial period is not commenced with the research provider within 12 months from the termination of an arrangement for the provision of research (including any previous trial period) with the research provider; and
- The firm makes and retains a record of the dates of any trial period accepted under this rule, as well as a record of how the conditions in (i) to (iii) were satisfied for each such trial period.xx
Capable of enhancing the quality of the service means that the minor non-monetary benefit is:
- Justified by the provision of an additional or higher level of service to the client and is proportional to the level of inducements received
- It does not directly benefit Tatton, its shareholders or employees without tangible benefit to the client
- It is justified by the provision of an ongoing benefit to the client in relation to an ongoing inducement; and
- The provision of the service by Tatton to the client is not biased or distorted because of the minor non-monetary benefit.
Benefits paid to or received from the client or a person on behalf of the client
Fees, commission, or non-monetary benefits are acceptable if paid to or accepted by the client or provided by a person on behalf of the client. In this instance, they are only acceptable if that person is aware that such payments have been made on that client’s behalf and the amount and frequency of any payment is agreed between Tatton and the client and not determined by a third party. For example, this could be the case where:
- The client pays Tatton’s invoice directly or it is paid by an independent third party who has no connection with Tatton regarding the investment service provided to the client and is acting only on the instructions of the client; or
- Cases where the client negotiates a fee for a service provided by Tatton and pays that fee.
This could be the case for accountants or lawyers acting under a clear payment instruction from the client or where a person is acting as a mere conduit for the payment.
Items not requiring authorisation prior to acceptance
The following instances are of a minor nature and therefore Tatton staff do not require authorisation from a Tatton Director to:
- Either provide or accept, where the minor non-monetary benefit is no more than £40 in value; and
- Received in the course of business.
Additionally, subsistence received during a one-day training course, conference or hospitality given to/by Providers/Introducers/clients with no overnight stay, do not require authorisation from a Tatton Director.
However, any such minor non-monetary benefits received in relation to the provision of a service to the client, must be disclosed to the client.
Items requiring authorisation prior to acceptance
The following instances require authorisation from a Tatton Director:
- minor non-monetary benefit in excess of £40 received in the course of business
- subsistence and accommodation received during a training course, conference or hospitality given to/by Providers/Introducers/clients which includes overnight accommodation
- any minor non-monetary benefit that includes an overseas element including trips to continental Europe
- any minor non-monetary benefit offered to a potential or existing client; and
- any fee or commission paid, or non-monetary benefit provided from the client or a person on behalf of the client.
Any fee, commission, or non-monetary benefit paid to, accepted from, provided to or received from the client or a person on behalf of the client and any minor non-monetary benefits either provided by Tatton or received by Tatton, must be notified to the Head of Compliance and will be recorded on Tatton’s Gifts and Hospitality Register.
For further information about this Policy, please refer to the Head of Compliance or a Tatton Director.
6. Remuneration Policy
The Tatton Asset Management Plc. Remuneration Policy was revised following the introduction of IFPR.
The policy covers TAM and its subsidiary companies (TAM Group) which includes Tatton Investment Management Limited (TIML). The policy covers the performance year which is 1 April to 31 March and will be reviewed on an annual basis.
The policy includes both fixed and variable remuneration and sets out TAM Group’s approach to remuneration with regards to all staff including Executive Directors, Non-Executive Directors, and Material Risk Takers (MRTs, as defined in SYSC 19G.5.1R).
The policy seeks to contribute towards achieving TAM Group’s strategic objectives by attracting, appointing, motivating, and retaining key talent while meeting its regulatory and legal requirements. It aims to ensure its remuneration practices are transparent and structured to reward long-term performance and sound risk management in a way which is consistent with the TAM Group’s culture. By achieving this it aligns the long-term interest of both stakeholders and employees and helps ensure the sustainable long-term success of the TAM Group.
The policy has been drafted in accordance with the MIFIDPRU Remuneration Code (SYSC 19G) as set out in the Financial Conduct Authority (FCA) Handbook. In addition, TAM Group places great importance on its staff contributing to TAM’s positive firm culture and values.
The TAM Group’s Boards adopt and annually review the Remuneration Policy and have overall responsibility for overseeing its implementation.
Together with the Group’s Remuneration Committee, consisting of three independent Non-Executive Directors, TAM’s Chief Financial Officer is responsible for overseeing the development and implementation of TAM Group’s remuneration policies and practices.
The Remuneration Committee is responsible for approving TAM Group’s remuneration policy and decisions generally, including its compliance with the Remuneration Code, subject to any applicable exemptions. This includes approving the overall remuneration budgets for salary increases and bonus payments. It is also responsible for agreeing levels of remuneration awarded to:
- CEO and direct reports
- Executive Directors
- Directors of Subsidiaries
- Any employee with a salary exceeding £100,000
In particular, the Remuneration Committee is responsible for directly overseeing the remuneration of the senior officers in risk management and compliance functions in TIML and across the wider Group.
The Remuneration Policy applies to all Group employees. Eligibility for specific benefits is dependent on the employee’s level of seniority and experience. The Remuneration Committee ensures that the policy operates in a non-discriminatory manner.
TAM Group sets out its employee structure based on the division in which they work and then by department and level of responsibility within each department. Employees are separated into Senior Management Function (SMF), Material Risk Takers (MRT) and other staff.
TIML is the only regulated entity within the TAM Group and is a non-SNI MIFIDPRU Investment Firm. TIML is within the scope of SYSC 19G.1.1R (2) and is entitled to disapply various provisions of the Remuneration Code including those relating to Shares, Instruments alternative arrangements; Retention Policy; Deferral; and Discretionary Benefits. Given the risk profile and activities of the firm it is considered appropriate not to apply these requirements.
TAM Group also applies the relevant provisions of the Remuneration Code to its other non- regulated subsidiaries which includes the identification of any Material Risk Takers (MRT’s)
The performance framework involves measuring the actual financial performance of the TAM Group against an annual budget of planned performance. The budget is assessed across a range of financial metrics and takes into consideration the risk appetite of the business.
The budget is set at the beginning of each financial year between all the commercial and operational Directors within the Group and the Group Finance function and then presented to each board within the Group and the TAM Board for approval.
Where Group performance exceeds the budget, appropriate provisions may be made to pay bonuses at an agreed budgeted level. These are payable at the end of each financial year or half year. If there is any underperformance, then the bonus provision is reduced to a level where the financial under performance exceeds the budgetary agreed bonus provision. If there is an overperformance it is at the TAM Board’s sole discretion to pay any additional non budgeted bonus.
There are risk adjustment mechanisms in place including bonus malus and claw back provisions, which apply under certain conditions.
As a regulated entity TIML employees are subject to requirements of the firms Training & Competence Scheme as well as the Senior Managers & Certification Regime and Code of Conduct Rules. There is a formal feedback and appraisal process in place which helps TIML to nurture a committed, engaged, and high performing team focused on delivering excellent customer outcomes.
To ensure that employees are not discriminated against on grounds of their age, employees are not paid by reference to their length of service.
Fixed and variable remuneration
The TAM Group sets remuneration to enable it to attract, motivate and retain the people it needs for each phase of its growth. All employees are entitled to certain contractual benefits which include salary and various benefits which are reviewed from time to time.
There are specific Bonus Schemes related to specific employees and all eligible employees are entitled to participate in them. They are discretionary, cannot be guaranteed nor considered as a contractual benefit as it is based on the performance of the TAM Group, the relevant business unit and the employee.
In taking any remuneration decisions the Group seeks to ensure an appropriate ratio between the fixed and variable components of total remuneration and to ensure that:
- fixed and variable components of total remuneration are appropriately balanced, and
- the level of the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable component.
Pay levels across gender are reviewed periodically by the TAM Group/Remuneration Committee to determine whether there are any gender pay gaps. If any are identified TAM Group will take steps to identify factors contributing to the gap and take mitigating action.
The main component of fixed remuneration is salary. TAM Group recognises that basic fixed remuneration primarily reflects an employee’s professional experience and organisational responsibility, as set out in the employee’s job description and terms of employment.
The Group’s overall approach to fixed remuneration includes:
- Salaries being reviewed annually, typically between February – March and made effective in April of that year
- The Remuneration Committee together with the relevant Boards being responsible for approving an overall budget for the annual employee increase
- TAM Group’s Boards being responsible for recommending the overall budget giving an overall percentage increase of the total salary approved as a budget, which can then be distributed to employees. This budget also includes provisions for promotions and salary adjustments to market rates (where necessary)
- Individual salary awards being determined following assessment of personal performance and consultation with line managers whilst also referencing where available salary survey and/or market data, ensuring that salaries are commensurate with the job performed, and are in line with comparable market rates, as far as possible.
In addition to salary the Group offers a range of additional benefits. The extent to which employees may or may not be entitled to these benefits is determined by their level of seniority within the TAM Group and/or whether they are considered permanent members of staff i.e., having successfully completed a six-month probationary period.
Promotions are considered as part of the annual review process. In the event an employee is promoted, they will be entitled to receive those benefits associated with the new role (where applicable).
Variable remuneration reflects the long-term performance of the employee as well as performance which is more than that required to fulfil the employee’s job description and terms of employment.
TAM Group has several separate bonus schemes. The Company General Bonus Scheme is made available to all TIML employees and a range of other employees within the wider Group which together with the EMI Scheme are subject to malus and claw back provisions.
All employees are eligible to participate in the Bonus Schemes with the following exceptions:
- those who joined the Group more than halfway through the year
- Non-Executive Directors
- those under notice (whether given or received) at the time the Bonus Award is made
- those subject to disciplinary actions and/or performance management; and
- other such criteria which may be included at the discretion of the Group from time to time.
Total variable remuneration is discretionary. All Bonus Awards including any deferred portion, is paid or vests only if it is sustainable according to the financial situation of TIML and the wider Group and justified based on its performance, that of the business unit and the individual employee concerned. The total variable remuneration will be reduced including through malus or claw back arrangements where the financial performance of TIML or the wider Group is subdued or negative.
Malus or claw back
Bonus Awards made to MRTs are subject to in-year adjustments, malus, or claw back arrangements.
Bonus Awards are subject to cancellation if the employee is terminated for gross misconduct.
Unvested Bonus Awards can be reduced in the following situations:
- Employee misbehaviour or material error
- Material downturn in financial performance for TIML, the wider Group or relevant business unit; or
- Material failure of risk management.
Claw back of vested Bonus Awards can be triggered in the following situations:
- Employee participated in or was responsible for fraud or other conduct which resulted in significant losses to TIML or the wider Group; or
- Employee failed to meet appropriate standards of fitness and propriety
- All severance pay made to MRTs will also be subject to malus and clawback arrangements.
Individual remuneration & eligibility
Both financial and non-financial criteria are considered when determining discretionary bonus awards, pay increases and promotions. In respect of financial criteria and eligibility for variable remuneration the over-riding consideration will always be the Group’s ability to pay a bonus award in the first instance and, the size of the bonus pool will help determine how it is allocated.
For non-financial criteria and eligibility, the individual must ensure that (for the performance year):
- They have not failed to follow any internal controls and procedures in relation to risk management that have caused (in part or in full) any material risk failure in TIML or the wider Group; and
- They have not been subject to a formal disciplinary process.
Annual remuneration review process
A central and independent internal review will be undertaken annually to ensure that the remuneration practices comply with the Remuneration Policy.
The process includes the Group’s Boards, Human Resources, and the Remuneration Committee. It promotes challenge and encourages further justification to support recommendations.
Final decisions are based upon the collective views and opinions. Each Board is responsible for ensuring this review is carried out and any necessary follow-up actions are taken.
Board members & Executive Directors remuneration
Here the remuneration structure is set by the Remuneration Committee. A review is carried out each year, published in the annual remuneration report which is approved by the shareholders at the AGM.