Prudential Disclosures
1 Introduction
1.1 Background
iCON Infrastructure LLP (“iCON” or “the Firm”) is a non-SNI MIFIDPRU investment firm. iCON was established in 2011 as a limited liability partnership and is regulated by the FCA as a UK investment advisor.
The iCON group is comprised of specialist infrastructure investment professionals based in London, with offices in Germany and France.
iCON Infrastructure North America Inc. (“iCON NA”) is a wholly owned subsidiary of iCON and is a sub-advisor to iCON, based in Toronto with a branch in New York. iCON NA is regulated by the SEC as a Registered Investment Adviser.
This document sets out the Investment Firm Prudential Regime (“IFPR”) disclosures for the Firm in accordance with the FCA Prudential Sourcebook for Investment Firms chapter 8 (“MIFIDPRU 8”). This includes transitional provisions relating to disclosures as outlined in MIFIRDPRU TP12.
1.2 Scope of application
iCON, as the individual MIFIDPRU Investment Firm, meets the level of application as defined in MIFIDPRU 8.1.7.
1.3 Disclosure policy
The disclosures are as at 31 March 2023 (the “Reference Date”) in line with the last set of published financial statements for the Firm.
1.3.1 Frequency and means of disclosure
These prudential disclosures are published annually, via the Firm’s external website (www.iconinfrastructure.com). The frequency of disclosure will be assessed if there is a material change in the nature or scale of either the individual entity or the iCON group’s activities.
1.3.2 Verification
These IFPR disclosures have been approved by iCON’s Management Board (“the Management Board”), the governing body of the Firm and are not subject to audit, except where they are prepared under accounting requirements for publication in the Firm’s financial statements.
2 Governance
2.1 iCON Management Board
The Management Board is responsible for the oversight and management of the Firm. This includes managing the various risks faced by the Firm and shaping the culture within the Firm.
iCON has a clear organisational structure with well-defined lines of responsibility. The Firm has effective processes to identify, manage, monitor and report the risks the Firm:
- is or might be exposed to, or
- poses or might pose to others,
and adequate internal control mechanisms, including sound administration and accounting procedures.
2.1.1 Risk governance
iCON has established, implemented and maintains risk management policies and procedures which identify the risks relating to the Firm’s activities, processes and systems, and where appropriate, set the level of risk tolerated by the Firm. iCON has adopted effective arrangements, processes and mechanisms to manage the risks relating to the Firm’s activities, processes and systems in light of that level of risk tolerance. The Firm is risk adverse and has a low risk tolerance.
Due to the nature, size and complexity of the Firm, iCON does not have an independent risk management function. The compliance risk management function is administered by the Compliance Officer who reports to the Management Board. Further, the Management Board is heavily involved in the day-to-day running of the business and the Firm’s management are therefore generally aware of risk issues as and when they arise.
2.1.2 Directorships held
The total number of executive and non-executive directorships held by members of the Management Board as at 31 March 2023 are set out below.
| Management Board member | Position | Number of Directorships |
|---|---|---|
| Paul Malan | Senior Partner | 10 |
| Daniel Agostino | Managing Partner | 7 |
| Iain Macleod | Managing Partner | 14 |
| Deryk King | Managing Partner | 1 |
Directorships held within the iCON group are counted as a single directorship and those in non-commercial organisations are excluded.
2.2 Adequacy of risk management arrangements
As at the Reference Date, the Management Board considered that it had in place adequate and appropriate systems and controls with regard to the Firm’s strategy and that the Firm is properly resourced and skilled to avoid or minimise losses that may arise from time to time.
2.3 Diversity & Inclusion
The Firm fosters an inclusive, equal and respectful work environment in which diversity is encouraged. These principles have been incorporated into iCON’s ‘Working at iCON’ internal culture statement developed in 2022, extracts of which are contained on the Firm’s website.
In September 2022 iCON hired a dedicated Head of Human Resources. In conjunction with the Management Board, iCON’s Human Resources team are working to advance the Firm’s strategic approach to diversity and inclusion within the framework articulated in the ‘Working at iCON’ document, in a way that is consistent with the Firm’s commitment to being a meritocracy.
3 Capital Adequacy
The Firm is required to maintain sufficient capital resources at all times. ‘Own funds’ describes the available capital resources of the Firm while ‘own funds requirement’ describes the capital required as a result of the business activities of the Firm.
A detailed breakdown of own funds, a reconciliation of own funds to the Firm’s audited balance sheet and a description of the main features of the capital instruments held by the Firm are presented in the Appendix.
3.1 Own funds
The table below shows the Tier 1 capital held by the Firm as at 31 March 2023.
| Own funds | £’000s |
|---|---|
| Ordinary Share Capital | 1,047 |
| Deductions | 0 |
| CET 1 Capital | 1,047 |
| Subordinated Loan | 0 |
| Tier 2 Capital | 0 |
| Total | 1,047 |
4 Own Funds Requirements
The Firm’s own funds requirement is calculated in accordance with MIFIDPRU 4.3, which states that the Firm’s own funds requirement is the highest of:
- its permanent minimum capital requirement under MIFIDPRU 4.4;
- its fixed overheads requirement under MIFIDPRU 4.5; or
- its K-factor requirement under MIFIDPRU 4.6.
A summary of these requirements is shown within the table below.
| As at 31 March 2023 | £’000s |
|---|---|
| Permanent minimum requirement (PMR) | 55 |
| Fixed overhead requirement (FOR) | 486 |
| K-factor requirement (K-AUM) | 60 |
| Own Funds Requirement (maximum of PMR, FOR and K-Factor requirement) | 486 |
4.1 Assessing the adequacy of own funds
The Firm assesses the adequacy of its own funds in accordance with the prescribed permanent minimum capital, fixed overheads and applicable K-factor requirements. In addition, the Firm undertakes an assessment of own funds requirements by considering:
- the material risks associated with the Firm’s ongoing business operations; and
- capital required to facilitate an orderly wind-down of the business.
Own funds requirement is formally reviewed, challenged and approved by the Management Board.
The Firm has assessed its additional own funds requirements using the transitional provisions under MIFIDPRU10 and will in future disclose its own funds requirements using the Internal Capital Adequacy and Risk Assessment process described under MIFIDPRU 7. The Firm has at all times met its own fund requirements.
5 Remuneration
5.1 Remuneration Committee
The Firm is only subject to the standard remuneration requirements as per SYSC 19G.1.1 and as such is not required to establish a Remuneration Committee. The Management Board has responsibility for setting, reviewing and ratifying compensation arrangements at the Firm.
5.2 Remuneration Policy
The Management Board has approved a Remuneration Policy for all staff including in respect of Material Risk Takers (“MRT’s”). It ensures that remuneration is aligned to the Firm’s business objectives, values, risk appetite, regulatory compliance and long-term sustainable success in order to support a high-performance culture and drive appropriate behaviours.
The Firm’s Remuneration Policy, which is reviewed annually, is designed to adhere to regulatory and legislative principles and aims to drive an appropriate risk-based culture within the firm.
5.3 Link between remuneration and performance
The Firm sets its base level of compensation at a sufficient level to allow for a fully flexible approach to be taken to the possibility of awarding (or not awarding) an annual discretionary bonus. The payment of a bonus is entirely at iCON’s discretion and will depend on both the financial position of the Firm and the relevant individual’s performance for that year (as determined in an annual performance review). Performance is assessed against the objectives set for the relevant staff member for the financial year in question and can include an assessment of the conduct of that individual (for example, failure to comply with compliance policies). Individual objectives include a mix of financial criteria (such as deals originated and successful investee company development) and non-financial criteria (including training, conduct and personal development).
5.4 Fixed and variable remuneration
Fixed compensation is set at the time of hiring and is composed of cash in the form of regular partnership drawings (for partners in the Firm, subject to the availability of Firm profits) or a salary (for employees).
Variable compensation can take the form of one or more of (i) cash (ii) awards of carried interest that are not considered as variable remuneration pursuant to SYSC 19G.1.27 and (iii) cash awards from a crystallised carried interest pool. Cash bonuses are awarded on an annual basis, following an annual appraisal and are subject to Management Board discretion. Carried interest awards and cash awards from a crystallised carried interest pool are generally awarded within a short time after the closing of a new fund and the realisation of carried interest respectively. Carried interest awards are based on seniority and expected level of contribution to the relevant iCON advised fund’s investment outcome.
5.5 MRT remuneration
The table below sets out the aggregate remuneration for MRT’s. Fixed compensation includes base salary. Variable compensation includes cash bonuses in respect of performance during the year and the grant date fair value of any other discretionary awards granted in respect of the financial year.
| For the year ended 31 March 2023 – aggregate fixed & variable remuneration | Senior management £’000s | Other MRT’s £’000s | Other staff £’000s |
|---|---|---|---|
| Fixed compensation | 1,598 | 3,827 | 4,405 |
| Variable compensation | 2,725 | 6,167 | 5,252 |
| – Cash | 2,725 | 6,167 | 5,252 |
| – Non cash | 0 | 0 | 0 |
| Total | 4,323 | 9,994 | 9,657 |
| Number of MRT’s | |
|---|---|
| Senior management | 7 |
| Other MRT’s | 9 |
5.6 Sign-on and severance payments
During the year ended 31 March 2023, guaranteed variable remuneration was awarded to one MRT. However, in accordance with MIFIDPRU 8.6.8 (7) the details of this award will not be disclosed as it would lead to the disclosure of information about an identifiable individual MRT.
Appendix
| Composition of regulatory own funds as at 31 March 2023 | ||
|---|---|---|
| Item | Amount £’000s | Source based on reference numbers / letters of the balance sheet in the audited financial statements |
| Own funds | 1,047 | |
| Tier 1 capital | 1,047 | |
| Common equity Tier 1 capital | 1,047 | |
| Fully paid-up capital instruments | 1,047 | Audited balance sheet figure |
| Share premium | ||
| Retained earnings | ||
| Accumulated other comprehensive income | ||
| Other reserves | ||
| Adjustments to CET1 due to prudential filters | ||
| Other funds | ||
| (-) Total deductions from common equity Tier 1 | ||
| CET1: Other capital elements, deductions & adjustments | ||
| Additional Tier 1 capital | ||
| Fully paid up, directly issued capital instruments | ||
| Share premium | ||
| (-) Total deductions from additional Tier 1 | ||
| Additional Tier 1: Other capital elements, deductions & adjustments | ||
| Tier 2 Capital | ||
| Fully paid up, directly issued capital instruments | ||
| Share premium | ||
| (-) Total deductions from Tier 2 | ||
| Tier 2: Other capital elements, deductions & adjustments | ||
| Own funds: reconciliation of regulatory own funds to balance sheet in the audited financial statements | ||
|---|---|---|
| Balance sheet as in published / audited financial statements As at period end (£’000s) | Under regulatory scope of consolidation As at period end (£’000s) | |
| Asset | ||
| Fixed – Tangible Assets | 432 | 442 |
| Fixed – Investments | 1,574 | 1,573 |
| Current – Debtors | 19,945 | 31,707 |
| Current – Cash | 22,554 | 10,554 |
| Total Assets | 44,504 | 44,276 |
| Liabilities | ||
| Current – Creditors | 15,137 | 22,823 |
| Total Liabilities | 15,137 | 22,823 |
| Members’ Equity | ||
| Members’ capital classified as equity | 1,047 | 1,047 |
| Loans & other debts due to members within one year | 28,320 | 20,406 |
| Total Members’ Interest | 29,368 | 21,453 |