MIFIDPRU 8 Disclosures

Effective Date: 22 April 2020

Last Modified: 30 July 2024

1. Introduction

1.1 Company Information

Currency Solutions Limited (“CSL”, “Currency Solutions” or “Firm”) is a private limited liability company incorporated and registered pursuant to the laws of the United Kingdom, with company registration number 04864491 and registered office situated at Unit 35, Hobbs Court, 2 Jacob Street, London SE1 2BG.

CSL has been authorised by the Financial Conduct Authority (the “FCA”) (under Firm Reference number: 602082) as a MiFID investment firm under the terms of the Financial Services and Markets Act 2000 to provide the following investment services to Retail, Professional and Eligible Counterparty Clients:

• Advising on investments (except on Pension Transfers and Pension Opt Outs);

• Arranging (bringing about) deals in investments;

• Dealing in investments as an agent;

• Dealing in investments as principal (subject to matched principal only); and

• Safeguarding and administration of assets.

CSL has been authorised by the Financial Conduct Authority (the “FCA”) (under Firm Reference number: 512130) for the provision of payment services.

1.2 Business Model

A high-level overview of our business model is as follows:-

Currency Solutions Limited (CSL) provides commercial foreign exchange services to individual and corporate clients who need to convert money from one currency to another. The overwhelming majority of the Firm’s business is in spot foreign exchange. In the course of its business, the Firm makes payments on behalf of its customers within the scope of the Payment Services Directive.

The Firm offers a full range of foreign exchange services for commercial purposes only. Currency Solutions does not provide a speculative service and barring exceptional circumstances expects all transactions to result in a currency exchange.

Operationally, the Firm operates as a broker. All material transactions are covered by its banking counterparties. The majority of the Firm’s activities fall within its payment services authorisation. 60% of the Firm’s revenues arise from spot transactions and 15% from forwards.

CSL only provides services to Professional Customers and has a dual authorisation from the FCA, one for payment services and one for MiFID investment services (principally used for Currency Options-based products) as follows: -

PAYMENT SERVICES (FRN 512130)

● Services enable cash to be placed on a payment account, as well as all the operations required for operating a payment account.

● Services enabling cash withdrawals from a payment account, as well as all the operations required for operating a payment account.

● Money remittance.

INVESTMENT SERVICES (FRN 602082)- The Firm has permission to provide the following services to retail, professional and eligible counterparty customers covering a broad range of contractually based instruments:-

● Advising on investments (except on Pension Transfers and Pension Opt Outs);

● Arranging (bringing about) deals in investments;

● Dealing in investments as an agent;

● Dealing in investments as principal (subject to matched principal only).

● Safeguarding and administration of assets.

The Firm’s customers invariably need to convert money from one currency to another via way of a Spot FX Contract. When the exchange is made, the Firm requires clients to settle their side of the trade before it settles with them. Money is with the Firm only for the time required to effect the settlement of the equivalent trade on the market side and to settle the proceeds with the client.

Investment transactions include options and certain forward-rate contracts. These are undertaken by customers who have a foreseen need to convert money at a future date. That need arises from a commercial transaction in the course of their main business. All trading carried out is performed by our certified persons.

CSL has sought to build its business on premium service and customer satisfaction. It has a 4.9* out of 5 rating on Trustpilot, with 93% of reviews rating it 5* and 6% rating it 4*. Customers can fulfil their FX needs via the web or by means of API access. Nevertheless, the Firm maintains a strong sales force. All of the Firm’s main corporate clients have a relationship manager and have the capacity to undertake trades over the telephone if they wish.

The IFPR prudential framework is designed to reflect the nature, size, and complexity of an investment firm’s activities. One key aspect of the new framework is that it provides for simpler and more bespoke capital requirements for investment firms. The IFPR regime distinguishes between “small and non-interconnected investment firms” (“SNI” firms) and non-SNI firms. The level of compliance with certain rules that will apply to a firm within the scope of the IFPR will be determined by whether or not the firm is an SNI or a non-SNI firm.

Currency Solutions is categorised as a non-SNI MIFIDPRU investment firm.

1.3 Purpose

This Disclosure Statement (the “Statement”) has been prepared by Currency Solutions in order to fulfil the regulatory disclosure requirements set out by the Financial Conduct Authority (“FCA”) in the regulator’s Prudential sourcebook for MiFID Investment Firms (“MIFIDPRU”) Chapter 8. In January 2022, the FCA introduced the Investment Firms Prudential Regime (IFPR), a new regime for firms authorised under the Markets in Financial Instruments Directive (MiFID). The regulation that formalises this regime is called MIFIDPRU.

The report is not required to be reviewed by the Firm's Auditor. Certain information has been omitted from the report if, in the opinion of the management of Currency Solutions, such information is of proprietary nature, price-sensitive, may intrude the privacy of the company’s clients or would not change or influence the assessment or decision of market participants or other users of the report.

1.4 Scope, Frequency and location of disclosures

The disclosures have been prepared as of 31 March 2024, CSL’s financial reporting year end, and are prepared solely for the purpose of fulfilling the Firm’s IFPR disclosure requirements. They have not been audited nor do they constitute any form of audited financial statement. MIFIDPRU 8 disclosures are published annually concurrently with the Annual Report and Accounts in accordance with regulatory guidelines. MIFIDPRU 8 disclosure report is available on the Firm's website at: https://www.CurrencySolutions.com/legal/ under the MIFIDPRU Disclosure section. Copies of the statement are available on request by writing to:

Currency Solutions Limited
Compliance Team
Unit 35, Hobbs Court, 2 Jacob Street, London, SE1 2BG,

2. Risk Management Objectives and Policies

To ensure effective risk management, Currency Solutions has adopted the Three Lines of Defence model, with clearly defined roles and responsibilities.

First Line of Defence:

The first line of defence is line management and the individuals who are either client-facing or in an operational role (such as processing and dealing with transactions on a day-to-day basis). Staff and line management follow the internal controls put in place and report any matters via the firm's agreed escalation protocols. The first line of defence is responsible for establishing an effective control framework within their area of operation and identifying and controlling all risks so that they are operating within the organisational risk appetite and are fully compliant with Currency Solutions’s policies and, where appropriate, defined thresholds. The first line of defence acts as an early warning mechanism for identifying (or remedying) risks or failures.

Second Line of Defence:

The second line of defence is constituted by the Risk and Compliance teams who work with the first line to ensure that monitoring levels of risk against risk appetite are reported to the Boards and escalated when outside of appetite. The Risk team is responsible for ensuring that the key risks to the business are known by line management and any particular risks are escalated to the appropriate level within Currency Solutions. Risk mitigation is a key part of the risk framework and methods of reducing risks are assessed at least on a yearly basis.

The Head of Risk & Compliance is tasked with the management of the compliance function of Currency Solutions. The Risk Management Function is responsible for proposing to the Board appropriate objectives and measures to define Currency Solutions’s risk appetite and for devising the suite of policies necessary to control the business including the overarching framework and for independently monitoring the risk profile, providing additional assurance where required.

Risk management is primarily accountable for setting the Enterprise risk management framework and policy, providing oversight and independent reporting on ongoing risk to our executive management and Risk Committee. Additionally, the risk management function provides an independent overview of the effectiveness of risk management enacted by the 1st line of defence.

Third Line of Defence:

The third line of defence is occasional audits undertaken by specialist compliance consulting firms to provide an independent assessment of the adequacy and effectiveness of the overall enterprise risk management framework and risk governance structures. The function provides independent, objective identification of areas of specific risk. The output of these consultancies enables benchmarking of our approach against that taken by other financial services providers.

2.1 Risk Management Framework

The CSL Board has ultimate responsibility for the governance of all risk-taking activity, including, but not limited to:

● Overall risk strategy, including risk appetite and the overall risk framework, including key policies, considering the macroeconomic and business cycle.

● Ensuring an adequate and effective internal control framework is in place, including a clear organisational structure including, but not limited to, controls to prevent money laundering and terrorist financing.

● Periodically assessing the effectiveness of the internal control framework and the implementation of processes, strategies and policies and taking steps to address any deficiencies.

● Monitoring that CSL’s Risk Culture is implemented appropriately and consistently.

● Ensuring effective policies are in place to identify, manage and mitigate actual or potential conflicts of interest.

● Measures to ensure CSL’s adequate capitalisation and liquidity.

● Approving the Firm’s Compliance Policy.

● Monitoring the implementation of the internal audit plan.

● Overseeing the integrity of financial information and reporting and the related internal control framework.

CSL maintains a holistic Enterprise Risk Management framework (“ERM”) which takes account of top-down and bottom-up analysis of current and potential future risks and facilitates informed decisions on risk taking and includes effective communication regarding risk and risk strategy to help prevent decisions which inappropriately increases risk. All relevant risks are considered, both financial and non-financial.

The ERM framework includes policies and procedures, risk limits and controls and uses forward-looking and backward looking tools and trend analysis to ensure adequate and timely assessment, monitoring, management, mitigation and reporting of risk under normal and under stressed conditions and to assess the economic substance of the Firm’s risk profile, including the risks to the Firm, the Firm’s customers and the market, and whether the risk profile is consistent with risk appetite and consistent with the sound operation of the Firm, including in respect of liquidity and capital, and with its strategic goals.

2.2 Risk Statement

The firm’s activities expose it to a variety of risks, and in particular to cyber and data security risk, regulatory risk, operational risk, strategic risk, credit risk, dispute risk, technology risk, liquidity risk, financial reporting risk and reputational risk.

2.3 Objectives, Policies and Strategies

The CSL Board owns the Risk Appetite Statement (RAS) and assisted by the Head of Compliance and MLRO, leads the development of the RAS in consultation with the Chief Executive Officer (CEO) and Operations Director (COO) and other key business leaders and stakeholders to ensure that the determinations presented accurately describe the toleration levels of residual risk that CSL is prepared to accept in the delivery of its business objectives.

Once approved by the Board, the RAS is communicated to relevant stakeholders via the Currency Solutions Senior Management Team. The RAS is published internally to staff so that they can understand the Firm’s appetite towards risk and can apply it in their business activities, actions, and behaviours. As part of this process, risk limits are set which are consistent with RAS and which are used for day-to-day risk management.

Risk appetite is formally reviewed, refreshed, and adjusted, at least annually or immediately following - or in anticipation of - an issue, event or opportunity that has the potential to impact significantly on Currency Solutions either directly or indirectly. Any change to risk appetite is recorded and reflected in the RAS. Details of changes to risk appetite will be communicated, as appropriate, to the Senior Management Team and stakeholders.

2.4 Risk Appetite

CSL’s Enterprise Risk Management Framework (ERMF) is the responsibility of the CSL Board. The Board’s Risk and Compliance sub-committee was established to monitor risk and compliance governance and to assist the CSL Board in discharging its responsibilities in ensuring that risks are properly identified, reported, and assessed; that risks are properly controlled; and that strategy is informed by and aligned with the Firm’s risk appetite. The Committee also oversees the Firm’s implementation of compliance programs, policies and procedures required to meet legal, compliance and regulatory requirements.

CSL has a dedicated Head of Compliance and MLRO and a Risk Officer.

The Head of Compliance and MLRO is a member of the CSL Senior Management Team and is responsible for the implementation and operationalisation of the CSL ERMF within Currency Solutions.

The Head of Compliance and MLRO reports directly to the CSL Chief Executive Officer and has primary obligations and reporting lines to the Risk Committee and Board. The Head of Compliance and MLRO formally reports quarterly to the Risk & Compliance Committee and Board. Quarterly reporting includes Key Risk Indicator (“KRI”) reporting, including notification of changes to KRI metrics.

2.5 Risk Culture

Risk culture is a critical element in Currency Solutions Limited’s risk management framework and procedures. Management considers risk awareness and risk culture within Currency Solutions Limited as an important part of the effective risk management process. Currency Solutions Limited is committed to embedding a strong risk culture throughout the business where everyone understands the risks they manage and is empowered and qualified to take accountability for them. Currency Solutions Limited embraces a culture where each of the business areas is encouraged to take risk-based decisions while knowing when to escalate or seek advice.

2.6 Key risks

Liquidity Risk

The risk is that CSL incurs losses resulting from the inability to meet payment obligations in a timely manner when they become due. CSL’s business model limits liquidity risk by requiring clients to settle in advance of bank transfers being released. There are options for clients that benefit from delays in collecting in variation margin when the options we have written move against them, and we have a robust process for chasing settlement of these.

Credit Concentration Risk

Currency Solutions’s credit risk appetite as defined in Credit Policy. In general, this means the firm has a conservative approach to credit risk, wishing to avoid single exposures or of correlated exposures with the potential to produce losses large enough to threaten the firm’s health or ability to maintain its core operations.

Capital Risk

CSL manages capital risk through consistent profitability, through consideration of the capital implications of strategic growth, through assessment of own funds requirements as part of the ICARA process and through ongoing monitoring of CSL’s capital requirement and capital resources as prescribed within the MIFIDPRU framework.

3. Governance

Through its internal governance structure, CSL incorporates a robust Internal Governance framework. Furthermore, the organisational structure incorporates the various organisational and functional reporting lines, as well as the different roles and responsibilities therein, while it also facilitates the compliance with the principle of segregation of duties and helps in the avoidance and control of possible conflicts of interest situations within Currency Solutions.

Moreover, Currency Solutions implements and maintains adequate risk management policies and procedures which identify the risks relating to Currency Solutions’s activities, processes, and systems, and, where appropriate, sets the level of risk tolerated by Currency Solutions. Currency Solutions adopts effective arrangements, processes, and systems, in light of that level of risk tolerance, where applicable.

3.1 Governance Framework

Currency Solutions’s governance framework is built upon a three lines of defence model that aims to ensure that accountability for the management of risk is owned and embedded in day-to-day management of the business. This concept ensures that each line reports independently to the Board and relevant sub-Committees. The three lines of defence are as follows:

The first line of defence includes the functions that adhere to policies, procedures and standards established by the CSL Senior Management Team and Board and are responsible for the management of the day-to-day business operations. Each business line owns the risks and controls for its respective business and retains full accountability for control of related business issues.

The second line of defence is performed by the control functions including the Risk Management Function, managed by the Head of Risk and the Compliance Function, managed by the Head of Compliance.

The third line of defence, comprising Internal Audit, provides assurance to the Firm's Risk Committee, Audit Committee, and the Board on the adequacy of the Firm's systems of internal controls, risk management and governance processes.

3.2 The Board of Directors

The Board has overall responsibility for the Firm, including ensuring that governance arrangements are in place to ensure effective and prudent management of the business.

The Board has responsibility for managing the Risk Management Framework and monitoring the Company’s risk management policies and procedures, including the identification and management of each of the key risks that the Company faces. The Board is committed to ensuring that high standards of governance are in place to protect the interests of shareholders and stakeholders, and promotes the highest standards of integrity, transparency, and accountability.

On 31 March 2024 the Board, was composed of three directors (including one Non-Executive Director). It is the Board’s responsibility to ensure that the Board, taken as a whole, is of sufficient size and has sufficient expertise to oversee the Company’s operations.

The Directors are appointed based on their skills, qualifications and experience whilst ensuring that they have appropriate time to devote to their responsibilities as a Board member in consideration of the commitments of other professional roles they may have.

Board composition on 31 March 2024

*Directorships within the same corporate are counted as one.

3.3 Governing Bodies & Committees

The Currency Solutions Limited business and its operations are subject to the following local and/or governance committees:

o CSL Board;

o CSL Risk & Compliance Committee;

o CSL Credit Risk and Liquidity Committee;

o CSL Technology & Product Committee.

These committees and Senior Management Team working groups are convened on a regular basis by the executive, support and control functions such as Executives, Compliance, Operations, IT, Finance, Legal, HR, and Risk.

3.3.1 Risk & Compliance Committee

The Risk and Compliance Committee (“RCC”) has an established Committee supporting governing the CSL business. It comprises of individuals whom the Board believes have appropriate knowledge, skills, and expertise to understand and monitor risk strategy and risk appetite.

The RCC was established to monitor risk and compliance governance and to assist the Currency Solutions Board in discharging its responsibilities in ensuring that risks are properly identified, reported, and assessed; that risks are properly controlled; and that strategy is informed by and aligned with the Firm’s risk appetite. The Committee also oversees the Firm’s implementation of compliance programs, policies and procedures required to meet legal, compliance and regulatory requirements.

The RCC met 4 times during 2023/4.

4. Diversity Policy

Currency Solutions is an equal opportunity employer, committed to a diverse and inclusive workplace, and does not discriminate based on gender, sexual orientation, civil or family status, race, religion or belief, nationality, ethnic or national origin, disability, age, pregnancy or trade union membership, or the fact that they are a part-time worker or a fixed-term employee.

Those working at a management level in Currency Solutions have a specific responsibility to set an appropriate standard of behaviour, to lead by example and to ensure that those they manage adhere to the policy and promote the values and objectives of the Firm regarding equal opportunities.

Currency Solutions believes in the power of the individual. Our people are our most valued asset. Currency Solutions is committed to ensuring an inclusive working environment for all employees to thrive in. Currency Solutions believes that the individual differences, self-expression and unique capabilities that people have should be recognised and celebrated, not discriminated against.

5. Remuneration Policies and Practices

5.1 Framework

CSL’s remuneration policy sets the framework for all remuneration-related policies, procedures and practices for all employees and directors. CSL is committed to developing sound remuneration polices and effective risk management on variable remuneration for its identified staff. The remuneration policy takes into consideration the following: Senior Management Arrangements and Systems and Controls (“SYSC”), MIFIDPRU Remuneration Code requirements.

The remuneration policy applies to all staff and ensures, amongst other things, sound internal governance arrangements, including remuneration policies and practices that are consistent with and promote sound and effective risk management and ensures a customer focused culture. The remuneration policy promotes gender neutrality by aligning Currency Solutions’s commitment to the provision of equal pay for male and female workers for equal work or work of equal value.

Currency Solutions ensures that policies and practices are appropriately implemented and aligned with the Firm’s overall corporate governance framework, corporate and risk culture, risk appetite and the related governance processes.

The firm is a non-SNI MIFIDPRU investment firm which is subject to SYSC 19G.1.1R(2).

5.2 Remuneration Committee

There is no Remuneration Committee at present, and the Executive Directors are on low salaries and do not receive bonuses. The long-term incentive arrangements for employees have regard to the recommendations put forward in the Corporate Governance Code and to industry benchmarks.

5.3 Fixed and Variable Remuneration

CSL defines fixed remuneration and variable remuneration as:

⮚ Fixed remuneration is permanent, pre-determined, non-discretionary, and non-revocable and cannot be reduced, suspended, or cancelled by CSL without the agreement of the employee. Fixed remuneration should primarily reflect the level of professional experience, organisational responsibility, and seniority of employees. The fixed remuneration includes annual salary paid in 12 monthly equal instalments, employer pension contributions and private health care contributions.

⮚ Variable remuneration is all remuneration which is not fixed and will include such things as:

• Annual bonus awards; and

• Commissions.

The firm sets and continues to review the fixed and variable components of the total remuneration for its staff are appropriately balanced to mitigate the risk of any undue risk taking beyond the firm’s risk appetite.

5.3.1 Flexible Policy on Variable Remuneration

The amount of variable remuneration awarded will appropriately react to changes in the performance of an employee and Currency Solutions. In addition, unethical or non-compliant behaviour will impact employee member’s variable remuneration. When setting the fixed elements of identified staff, Currency Solutions will take account of several factors:

✧ Degree of seniority;

✧ Level of expertise and skill;

✧ Experience;

✧ Relevant business activity; and

✧ Market conditions in the relevant jurisdiction

When setting total remuneration, remuneration in the previous year shall be considered. Corporate and individual performance will be examined when reviewing variable remuneration. Remuneration is subject to risk adjustment. Individuals’ performance is measured against documented and agreed-upon objectives. There is no minimum pay increase and no contractual bonuses for current material risk takers.

5.4 Quantitative remuneration information

The following represents the aggregate quantitative remuneration information for staff who have a material impact on the risk of the institution.

During 2023/4, two members of senior management and four other staff were identified as having a material impact on the risk profile of the Firm (“material risk takers”).

Currency Solutions Limited in line with SYSC19G interprets the term ‘staff’ broadly for the purpose of the Remuneration Code to include SMFs, Material Risk takers and Certified staff, other staff and contractors.

In 2023/4, there were no severance payments or guaranteed variable remuneration made by the firm to any of the firm’s material risk takers or staff.

6. Own Funds

Under MIFIDPRU, the firm is required to disclose:

• A reconciliation of common equity tier 1 items, additional tier 1 items, tier 2 items, and the applicable filters and deductions applied in order to calculate the Own Funds of the firm – see Table 1 below;

• A reconciliation of 1 (above) with the capital in the balance sheet in the audited financial statements of the firm – see Table 2; and

• A description of the main features of the common equity tier 1 instruments, additional tier 1 instruments and tier 2 instruments issued by the firm – see Table 3.

6.1 Composition of regulatory own funds

6.2 Reconciliation of regulatory own funds

6.3 Instruments issued

7 Own Funds Requirements

7.1 Approach to Assessing Capital Adequacy

In accordance with the MIF001, MIF002 and the Firm’s internal capital and liquidity requirement methodology document, the Firm's capital requirement is monitored daily by the Finance Team. Following the preparation of quarterly accounts, capital adequacy calculations are prepared and filed with the Financial Conduct Authority under the Firm’s MiFID licence.

CSL is classified as a Class 2 Firm under IFPR and utilises the higher K-factors and/or Fixed Overhead Requirements to calculate its capital requirements. Additionally, the Firm fully assesses its risk profile to ensure there is a credible link between its risk profile and the capital it maintains through the ICARA process. This process identifies specific areas of risk outside of the firm's K-factors and assigns extra capital to ensure the Firm is fully capitalised to compensate for these risks.

As of 31 March 2024, and always throughout the 2023/4 calendar year, the Firm complied with its prudential minimum capital requirements in that the capital resources were well in excess of the combined regulatory capital requirements.

7.2 K-factor requirements

The following table sets out the Firms K-factor requirements as per the 31 March 2024 MIF001 – Own Funds capital return submitted to the Financial Conduct Authority.

8. Investment Policy

CSL, as a Non-SNI firm, does not meet the conditions which would require disclosure of an investment policy and does not hold any proprietary investment positions.

9. Environmental, Social & Governance risks (“ESG” risks)

ESG risks and policies are disclosed in the annual report, which is publicly available on the firm’s website and also on Companies House.