Parmenion Capital Partners LLP
Pillar 3 Disclosures

1. INTRODUCTION

The Capital Requirements Directive (“CRD”) created a revised regulatory capital framework across Europe, based on the provisions of the Basel II Capital Accord. The disclosures in this document complement the ongoing work undertaken by Parmenion Capital Partners LLP (the “Firm”) in the assessment of its capital requirements under the Financial Services Authority’s (“FSA”) Internal Capital Adequacy Assessment Process (“ICAAP”). This Pillar 3 disclosure document is prepared in accordance with chapter 11 of the FSA’s Prudential sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”).
The Firm is not part of a group of companies and prepares its accounts to 31 March each year, under UKGAAP.
These disclosures will be made on an annual basis and the report will be published on the Firm’s website (www.parmenion.co.uk). Copies of the report will also be available on request by writing to the Managing Partner at The Tramshed, Beehive Yard, Walcot Street, Bath, BA1 5BB.

2. CORPORATE BACKGROUND

Parmenion unite discretionary investment management with a technologically advanced platform to enable Financial Advisers to create their own unique, web-based, client facing investment platform solution, configured and branded to meet with their particular financial planning requirements.  Our technology allows access to high quality investment management for every client of an Adviser’s firm.
Parmenion’s online business process enables a Financial Adviser and their client to define an investment mandate with compliant risk profiling, asset allocation and application, in a few simple steps. The requirements of fund research, trade execution, fund switches, rebalancing and reporting are all automated through our platform.
Parmenion offer a wide range of investment options via multiple wrappers tailored to specific client needs.  These include active and passive investment, strategic and tactical asset allocation, ethical investing and even portfolio management driven by other discretionary investment firms. 
We are an independent and privately owned company, backed by some of the most experienced investment and technology executives in the industry.  We do not offer financial advice or meet with clients ourselves, but only offer investment and client facing solutions as dictated by the demands of modern financial planning.

3. RISK MANAGEMENT

The Firm’s Designated Members (the Governing Body) are responsible for setting the risk appetite of the Firm. The Firm has a risk appetite that is consistent with any recently initiated business funded as a carefully considered speculation. The Firm’s risk appetite is considered by the Governing Body in conjunction with its reviews of the Firm’s strategy. The last such review was carried out in late 2011 the next one is due to be done  in conjunction with the annual business planning exercise.
The Governing Body do not believe a separate Risk Department is viable. Management of risk is handled by the Firm’s various committees and business processes (eg regular compliance and accounting meetings and compliance and operational monitoring).

4. APPROACH TO ASSESSING CAPITAL ADEQUACY

The ICAAP is a process that brings together the management framework implemented to identify, manage and mitigate the risks the business faces, within the financial discipline of budgeting and business planning.
The ICAAP will be reviewed and updated at least annually, unless there are any changes in the control environment or other events that warrant a more immediate update.

When reviewing and challenging each update the Governing Body will review its stated risk appetite and compare it against actual performance. It will also consider the appropriateness of the stress tests performed as part of the ICAAP. Not all material risks can be mitigated by capital but where capital is appropriate the Governing Body has adopted the approach of to determine the level of capital that needs to be held.  Where the Governing Body consider that the Pillar 1 calculation does not adequately reflect the possible risk impact, additional capital would be allocated as part of the ICAAP.

5. REVIEW OF MATERIAL RISKS

The Firm has assessed its risks under the following headings (as set out in the FSA’s General Prudential sourcebook):
(a) Credit risk
The Firm deals predominantly with the following counterparties:
Clients – The Firm has historically had no bad debts. This is because all income is deducted from assets held on behalf of clients who agree to this at outset.
Market counterparties – The Firm has exposure when transmitting funds through UK banks to the fund management companies whose funds it purchases.
Banks/custodians – When investing its own cash funds, and when placing the cash part of its clients’
investment portfolios, the Firm deals with banks based on a number of factors, including their ratings
and security as perceived in the market. The investment of these funds reflects the Firm’s low risk
appetite. The Firm uses the following established market custodians: Stocktrade.
(b)Market risk
The Firm is not exposed directly to market risk, as it does not hold principal positions. The impact of
market movements on the capital position of the Firm is considered under Business Risk.
(c) Liquidity risk
The Firm currently has no material liquidity risk as It has a relatively high level of cash by comparison with
its capital resources, no borrowings and an undertaking from its most significant member to supply funds through a loan facitlity under extreme circumstances.
(d) Operational risk
The Firm carries out a risk assessment in its ICAAP process in which the operational risks faced are considered. The Firm considers that it has reasonable controls in place, particularly in the segregation of duties in relation to cash and stock transfers, to protect it from the operational risks identified in its risk assessment. The business operations of the Firm are at risk of disruption from one off events, such as terrorism, flooding or fire. To  counter this risk, the Firm has a Disaster Recovery Plan. The Firm also maintains off-site facilities and back-up computer systems for the Firm with a third party provider, which are tested each year. The Firm’s insurance covers office loss and business continuity. The Firm is a BIPRU limited licence firms and consequently the FSA’s rules on operational risk capital requirement do not apply.
(e) Insurance risk
The Firm maintains Professional Indemnity (“PI”), Directors & Officers Liability (“D&O”), and
Commercial/Office Insurance for the benefit of the Firm. The policies, which are in market standard
terms, cover the most likely sources of loss to the Firm to a level that is proportionate to the scale of
the Firm’s business. The policies are underwritten by insurers with satisfactory credit ratings.
In the event that any of these policies do not pay out as soon as anticipated, the Firm’s existing regulatory
capital resource requirement (which is based on its fixed overhead costs) and its access to additional capital from its members mean that the Firm is in a position to continue to operate. In the event that a particular loss falls outside the terms of its insurance, the Firm’s management will, where appropriate, make provision in the ordinary course of business for such potential losses as soon as is prudent. Having considered the policy excesses, no additional capital has been allocated under the ICAAP to cover an exposure the Firm may face outside the fixed overhead costs taken into account in its regulatory capital resource requirement.
(f ) Concentration risk
The Firm has no material concentration of credit risk. The Firm has over 3,500 private client accounts drawn
entirely from the UK private client sector. This is a large sector worth over £1trillion of which the
Firm has less than a 1% exposure (as at July 2011).
(g) Residual risk
The Firm does not lend money; the vast majority of its debtors are trade debtors and it has very limited
exposure to credit risk.
(h) Securitisation risk
This risk is not relevant to the Firm.
(i) Business risk and stress testing
The Firm considers that the risk that it may not be able to carry out its current business plan and desired
strategy derives principally from a drop in revenue due to: a fall in the equity markets; commercial pressure from competitors; or damage to the Firm’s reputation, either through damage to the investment management market or to the Firm itself.
As required as part of the Firm’s ICAAP, the Firm has conducted stress testing on its financial forecasts for both income and capital. The stress tests are based on a combination of adverse events including significant falls in the equity markets.
The testing shows that the Firm has the financial resources to continue to trade during such scenarios with capital resources in excess of its regulatory capital resource requirement. The Firm’s management, which also represents its key shareholders, is well placed to take the necessary management action to protect the Firm’s trading position.
(j) Interest rate risk
This risk is not relevant to the Firm.
(k) Pension obligation risk
This risk is not relevant to the Firm.
Other disclosures
The Firm does not use the VaR model for calculating its market risk capital requirement.

6. REGULATORY CAPITAL RESOURCES

Firm Regulatory Capital Resources
(As reported at 31 March 2011)

7. CDR3 REQUIREMENTS - DISCLOSURE OF REMUNERATION

Remuneration expenses are the greatest individual element of Parmenion's costs comprising approximately two thirds of expenditure charged against revenue.  The Parmenion Remuneration Committee comprising two non executive members of the firm oversees the approval of salaries, drawings, benefits and bonuses for all the individuals working in the business.  Staff related costs are largely of a fixed nature, comprising salary or partners drawings set in advance on an annual basis.  In addition and comprising less than 10% of total remuneration, staff responsible for working with supporting introducers receive sales commission based on funds introduced for investment.  These are paid quarterly.  In addition a discretionary bonus scheme operates, on a twice annual basis, which awards bonuses to staff based on an assessment of individual performance.  These have not been material to the financial position of the firm to date.  Disclosure of quantitative information will appear after the completion of the firm's year end which is on 31 March 2012.