This document constitutes the Investment Firm Regulation disclosures of Fisher Investments Luxembourg, S.à r.l. (the “Firm” or “FIL”), as of 31 December 2023. FIL is authorised and regulated by the Commission de Surveillance du Secteur Financier (“CSSF”) and this document sets out how FIL complies with its obligations to identify, manage and mitigate identified risks. The purpose of this document is to publicly disclose information as required under Art. 46 of the Investment Firms Regulation1 (“IFR”) and Art. 44 of the EU Directive No 2019/2034 Investment Firms Directive2 (“IFD”).
Under the IFR the Firm is classified as a Class 2 firm, hence applying in full the relevant prescriptions of the new prudential framework.
The Firm provides discretionary portfolio management services to high net worth MIFID retail clients via established branches in Denmark and the Netherlands and via cross-border activities into Belgium, France, Sweden and Norway.
In France, the Firm is also providing the services of insurance brokerage. Where a prospective client in France has assets invested in an insurance (‘assurance vie’ or ‘contrat de capitalisation’) policy, the Firm is distributing life insurance policies issued by partner insurance companies.
The governance model is designed to promote transparency, accountability and consistency through clear identification of roles, the separation of business, governance and control structures, by tracking performance against accountabilities.
FIL has established three Lines of Defense, which all have a focus on the management of risks and controls. The First Line of Defense is business management. The Second Line of Defense consists of Enterprise Risk Management and Compliance, both of which are independent of the business. The Third Line of Defense, Internal Audit, is independent from both the First and Second Lines of Defense and reports directly to the Board of Managers.
Board of Managers
The Board of Managers of the Firm are responsible for the Firm’s risk management governance structure and how the Firm’s risk exposure must be managed in line with the Firm’s overall business objectives and within its stated risk appetite. This includes the governance of the process for identifying, evaluating, managing and reporting the significant risks faced by the Firm.
The Board of Managers are ultimately responsible for ensuring that the Firm maintains sufficient capital and liquidity resources to meet its regulatory capital and liquidity requirements and to support its growth and strategic objectives. Risk management is embedded throughout the business, with the overall risk appetite and risk management strategy approved by the Board of Managers propagated down throughout the business as appropriate.
The Non-Executive Directors have broad business and commercial experience with independent and objective judgement and they can provide independent challenge to the Board of Managers. They are able to allocate sufficient time to meet the expectations of their role with the Firm.
Authorised Management
The Authorised Management is composed of three members who are in charge of the effective, sound and prudent day-to-day business and risk management of FIL. The Authorised Management implements, through internal written policies and procedures, the strategies and guiding principles set by the Board of Managers in relation to central administration and internal governance and ensures that FIL is in compliance with legal and regulatory requirements taking into account the reports/comments of the internal control functions. The decisions taken by the Authorised Management in these areas are duly documented. Authorised Management has veto rights on any decision made by any FIL specialised committees.
Internal Control Committee
The Internal Control Committee is comprised of at least two Authorized Managers, including the Chief Compliance and Risk Officer, and is subject to the Firm’s Compliance Charter. It is responsible for oversight of all aspects of the Firm’s risk, internal audit, and compliance functions, in accordance with section 6.2 of Circular CSSF 20/758, and reporting to the Board of Managers on such matters.
The Internal Control Committee meets on a quarterly basis or otherwise as appropriate.
Joint Investment Oversight Committee (the “IOC”)
For efficacy purposes, the IOC works as a cross-entity committee with membership representation from each of the Fisher Group companies that have an interest in oversight by the IOC. At least one member shall be a member of the Board of Managers of the Firm.
Members of the IOC shall vote only on matters impacting the applicable Fisher Group company that such members represent. The IOC is governed by the Joint Investment Oversight Committee Terms of Reference, which also sets out the full membership of the IOC.
The IOC is responsible for overseeing the suitability of advice provided by the Firm, and its affiliates Fisher Investments Luxembourg Limited and Fisher Investments Europe Limited (each, a “European Fisher Entity”), including the assumptions and analysis underlying such advice, as well as overseeing Fisher Investments’ management/sub-management of client accounts managed by a European Fisher Entity or introduced to Fisher Investments.
The IOC meets at least four times per year and otherwise as appropriate.
The total number of Directorships held by the members of the Board is 17 (of which none are external of the Fisher Group Directorship).
The Firm recognizes the importance of having a diverse composition of its Board including diversity of skills, experience and gender.
The Fisher Group has developed a program that communicates a stated commitment to fostering an inclusive culture, actively developing and supporting diversity, where all feel welcomed and supported, and embodying these values across the Fisher Group as fundamental to long-term success. Diversity and Inclusion (“D&I”) is also addressed through the Firm’s Employee Handbook.
The FIL Board has ultimate responsibility for the effectiveness of risk management within FIL, and to fulfil its obligations has delegated the development of a Risk Management Framework (”RMF”) to the Risk function.
The RMF forms part of the overall risk governance infrastructure of FIL, which uses a hierarchy of committees with responsibilities delegated down from the Board as appropriate, with roles and responsibilities allocated in accordance with the risk management industry standard, three Lines of Defense model. The governance and oversight structure within FIL aims to ensure that risk management activities are implemented and operated effectively, and will continually evolve as the business evolves.
The Board as the ultimate decision-making body within FIL, is responsible for approving the RMF and Risk Appetite statements, and Capital assessments as part of the Internal Capital and Liquidity Adequacy Assessment Process (“ICLAAP”), setting the tone from the top on the Firms risk culture, challenge and oversight of risks identified in FIL.
In line with the prescriptions of the IFR, the Firm is exposed to two separate risk categories from a Pillar 1 perspective: risk to client and liquidity risk.
K-AUM (Assets under management) and K-COH (Client orders handled)
Being authorized for the provision of investment advice and portfolio management services, the Firm is subjected to the applicability of the K-AUM and K-COH risk from a regulatory perspective.
Risk to Client addresses risks carried by an investment firm during the undertaking of its services, actions or responsibilities, which could negatively impact clients.
The Firm’s has a structured approach to ensure that its clients receive investment services that are in line with the applicable regulatory prescriptions. To this extent, prior to providing clients with investment recommendations, a comprehensive suitability assessment is conducted in order to identify the appropriate way to align the clients’ business goal with the investment strategy of the Firm.
The portfolio management function is outsourced to Fisher Investment’s Investment Portfolio Committee ("IPC"), a team of 5 senior level investment professionals collectively serving as the portfolio manager, who make the day-to-day investment decisions for client accounts.
Additionally the Firm is part of the Fisher’s Joint Investment Oversight Committee, which is responsible for overseeing the suitability of advice to clients and prospective clients, overseeing outsourced investment sub-management functions, and the Firm’s product governance policy.
The Firm has a comprehensive system of internal controls, policies and procedures that are evaluated for adequacy and effectiveness.
Liquidity Risk
Responsibility for liquidity management rests with FIL’s Board. The Board is also responsible to ensure the liquidity review process is completed, review for material events, and approve any amendments to the framework.
Monitoring of FIL’s liquidity position is performed by the Finance team. The primary objectives of effective liquidity management are to ensure that the firm’s core businesses are able to operate and support client needs, meet contractual and contingent obligations through normal economic cycles and during stress events, to ensure funding mix optimization and ensure availability of liquidity sources.
In accordance with Article 13(1) of the IFR, the Firm should hold liquid assets equivalent to at least one third of the fixed overhead requirement.
As of 31 December 2023 FIL met its liquidity requirement in full.
FIL’s Remuneration Policy was developed and implemented by FIL’s Remuneration Committee.
FIL’s Remuneration Committee includes at least two individuals from the Fisher group of companies (the “Fisher Group”), at least one of whom is a member of the Board. The Remuneration Committee is responsible for all aspects of the Remuneration Policy, assessing both the Remuneration Policy and the structure and amount of remuneration on at least an annual basis, and overseeing the determination of remuneration paid to staff.
FIL’s Remuneration Code Staff includes those employees, agents and outsourced personnel who are members of administrative or management bodies at FIL or whose professional activities have a material impact on FIL’s risk profile.
Remuneration Code Staff who are employees of FIL receive a fixed salary, as well as benefits including a pension or equivalent arrangements and private health insurance. In addition, Remuneration Code Staff who are managers or otherwise responsible for a business unit(s), are eligible for variable remuneration based on metrics designed to encourage the development of a successful team in the business unit for which the Remuneration Code Staff is responsible and take into account the measurable performance of the relevant business unit employees. Bonuses are designed to encourage meeting ongoing measurable targets and are therefore paid out in cash upon attaining targets.
The Firm has in place an appropriate ratio between the variable and the fixed component of the total remuneration in the Remuneration Policy.
FIL’s Remuneration Policy splits the variable remuneration from the advice process. Specifically, whether to recommend discretionary asset management services, and the recommended asset allocation, is determined by employees who do not earn commissions or formula-bases bonuses. Further, employees and agents who are eligible to receive variable commissions and/or formula-based bonuses also receive either a fixed salary or call fees that are not contingent upon a client hiring FIL, which forms a substantial portion of their overall remuneration, as appropriate for their roles.
In the event of reasonable evidence of employee or agent misbehavior or material error (which may include failure to follow any of FIL’s policies and procedures or for conduct exposing FIL to undue conduct or other risk), the Remuneration Committee will determine the extent to which variable remuneration should be reduced.
The Firm benefits from a derogation laid down in Article 32(4) of IFD.
The aggregate remuneration paid to all Remuneration Code Staff in 2023 was €12M. Of total remuneration, €2.1M was fixed remuneration and €9.9M was variable remuneration. The total number of all Remuneration Code Staff was thirty-four.
During 2023 the Firm did not pay any guaranteed variable remuneration nor severance payments to any Remuneration Code Staff.
A strong capital position is essential to the Firm’s business strategy and competitive position. The Firm’s capital strategy focuses on long-term stability, which enables it to continue to build and invest in business activities through normal and stressed environments. The Firm’s capital management objectives are achieved through ongoing monthly monitoring of its capital positions with reporting of this to the Firm’s Board quarterly, periodic stress testing and adequate updates to the Firm’s ICLAAP to ensure appropriate capital planning.
The Firm's own funds requirements is the highest of the three items outlined below, in line with Art. 11 of the IFR as of 31 December 2023.
|
Item |
Amount (EUR) |
Regulatory Reference |
|---|---|---|
|
Permanent minimum capital requirement |
75,000 |
Art. 9.2 of IFD |
|
Fixed overhead requirement |
7,473,808 |
Art. 13 of IFR |
|
Total K-Factor Requirement |
784,186 |
Art. 17 of IFR |
|
Own Funds requirement |
7,473,808 |
Art. 11 of IFR |
Therefore, the Firm’s capital requirement as of 31 December 2023 is €7,473,808 based on the Firm’s fixed overhead requirement. The Firm’s fixed overhead requirement based on 2023 audited expenditures is €9,620,675.
The Firm’s capital as presented in the 2023 unaudited financial statements and deductions from capital are presented below, in line with Art. 49 of IFR and the prescriptions of the Implementing Technical Standard for supervisory reporting and disclosures of investments firms3 (“ITS 2021/2284”).
Given that the Firm’s capital resources, fully composed by Common Equity Tier 1 capital ( the Firm has no Additional Tier 1 or Tier 2 capital) of €16,179,095 are well in excess of the capital resource requirement of €7,473,808 and of the fixed overhead requirement based on 2023 audited expenditures of €9,620,675, it is the Firm’s view its capital is sufficient for both regulatory needs and business objectives.
