From 1 January 2015 Cypriot Investment Firms (hereon "CIFs") are required to disclose annually, specifying, by Member State and by third country in which it has an establishment, the following information on a consolidated basis for the financial year:
a. name(s), nature of activities and geographical location
b. turnover;
c. number of employees on a full time equivalent basis;
d. profit or loss before tax;
e. tax on profit or loss;
f. public subsidies received.
The information referred to here above shall be audited in accordance with the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009 and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the CIF concerned.
CIFs must disclose in their annual report among the key indicators their return on assets, calculated as their net profit divided by their total balance sheet.
Our approach: Beginning with the Report and Financial Statements for the year ended 31 December 2015, the above stated information is disclosed in
the notes to the Financial Statements. The Firm's Report and Financial Statements can be made available upon request at clientservice@otcm.eu.
a. where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the business unit concerned and of the overall results of the CIF and when assessing individual performance, financial and non-financial criteria are taken into account;
b. the assessment of the performance is set in a multi-year framework in order to ensure that the assessment process is based on long-term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the underlying business cycle of the CIF and its business risks;
c. the total variable remuneration does not limit the ability of the CIF to strengthen its capital base;
d. guaranteed variable remuneration is not consistent with sound risk management or the pay-for-performance principle and shall not be a part of prospective remuneration plans;
e. guaranteed variable remuneration is exceptional, occurs only when hiring new staff and where the CIF has a sound and strong capital base and is limited to the first year of employment;
f. fixed and variable components of total remuneration are appropriately balanced and 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 remuneration component;
g. CIFs must set the appropriate ratios between the fixed and the variable component of the total remuneration, whereby the following principles shall apply:
Any approval of a higher ratio in accordance with point (g)(ii) must be carried out in accordance with the following procedure:
- the variable component shall not exceed 100 % of the fixed component of the total remuneration for each individual.
- shareholders of the CIF may approve a higher maximum level of the ratio between the fixed and variable components of remuneration provided the overall level of the variable component shall not exceed 200 % of the fixed component of the total remuneration for each individual.
- the shareholders must act upon a detailed recommendation by the CIF giving the reasons for, and the scope of, an approval sought, including the number of staff affected, their functions and the expected impact on the requirement to maintain a sound capital base;
- shareholders must act by a majority of at least 66 % provided that at least 50 % of the shares or equivalent ownership rights are represented or, failing that, must act by a majority of 75 % of the ownership rights represented;
- the CIF must notify all shareholders of the CIF, providing a reasonable notice period in advance, that an approval under the first subparagraph of this point will be sought;
- the CIF must, without delay, inform the Commission of the recommendation to its shareholders, including the proposed higher maximum ratio and the reasons therefore and must be able to demonstrate to the Commission that the proposed higher ratio does not conflict with the CIF's obligations under this Directive and under Regulation (EU) No 575/2013, having regard in particular to the CIF's own funds obligations;
- the CIF must, without delay, inform the Commission of the decisions taken by its shareholders, including any approved higher maximum ratio pursuant to point (g)(ii), and the Commission must use the information received to benchmark the practices of CIFs in that regard. The Commission shall provide the European Banking Authority ("EBA") with that information and EBA shall publish it on an aggregate home Member State basis in a common reporting format;
- staff who are directly concerned by the higher maximum levels of variable remuneration referred to in point (g)(ii) of this paragraph must not, where applicable, be allowed to exercise, directly or indirectly, any voting rights they may have as shareholders;
Our approach: Olive Tree Capital Markets Limited complies with all the requirements stated here above. In particular:h. payments relating to the early termination of a contract reflect performance achieved over time and do not reward failure or misconduct;
- CIFs may apply the discount rate to a maximum of 25 % of total variable remuneration provided it is paid in instruments that are deferred for a period of not less than five years.
I. remuneration packages relating to compensation or buy out from contracts in previous employment must align with the long-term interests of the CIF including retention, deferral, performance and clawback arrangements;
j. the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes an adjustment for all types of current and future risks and takes into account the cost of the capital and the liquidity required;
k. the allocation of the variable remuneration components within the CIF must also take into account all types of current and future risks;
l. substantial portion, and in any event at least 50 %, of any variable remuneration must consist of a balance of the following:
- shares or equivalent ownership interests, subject to the legal structure of the CIF concerned or share- linked instruments or equivalent non-cash instruments, in the case of a non-listed CIF;
- (where possible, other instruments within the meaning of Article 52 [1] or 63 [2] of Regulation (EU) No 575/2013 or other instruments which can be fully converted to Common Equity Tier 1 instruments or written down, that in each case adequately reflect the credit quality of the CIF as a going concern and are appropriate to be used for the purposes of variable remuneration.
The instruments referred to in this point must be subject to an appropriate retention policy designed to align incentives with the longer-term interests of the CIF. This point must be applied to both the portion of the variable remuneration component deferred in accordance with point (m) and the portion of the variable remuneration component not deferred;m. a substantial portion, and in any event at least 40 %, of the variable remuneration component is deferred over a period which is not less than three to five years and is correctly aligned with the nature of the business, its risks and the activities of the member of staff in question.
Remuneration payable under deferral arrangements shall vest no faster than on a pro-rata basis. In the case of a variable remuneration component of a particularly high amount, at least 60 % of the amount shall be deferred. The length of the deferral period shall be established in accordance with the business cycle, the nature of the business, its risks and the activities of the member of staff in question;
n. the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the CIF as a whole, and justified on the basis of the performance of the CIF, the business unit and the individual concerned.
Without prejudice to the general principles of national contract and labour law, the total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the CIF occurs, taking into account both current remuneration and reductions in payouts of amounts previously earned, including through malus or clawback arrangements.
Up to 100 % of the total variable remuneration shall be subject to malus or clawback arrangements. CIFs must set specific criteria for the application of malus and clawback. Such criteria shall in particular cover situations where the staff member:
o. the pension policy is in line with the business strategy, objectives, values and longterm interests of the CIF.
- participated in or was responsible for conduct which resulted in significant losses to the CIF;
- failed to meet appropriate standards of fitness and propriety;
If the employee leaves the CIF before retirement, discretionary pension benefits shall be held by the CIF for a period of five years in the form of instruments referred to in point (l). Where an employee reaches retirement, discretionary pension benefits must be paid to the employee in the form of instruments referred to in point (l) subject to a five-year retention period;
p. staff members are required to undertake not to use personal hedging strategies or remuneration- and liability- related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;
q. variable remuneration is not paid through vehicles or methods that facilitate the noncompliance with this Directive or Regulation (EU) No 575/2013.
- In relation to points (a) and (b) hereabove, the performance appraisal process is geared in such a way as to force the discipline on the assessor to take into account the performance of the business unit and the Firm, in addition to the performance of the individual concerned and also to take into account qualitative factors such as punctuality and the number of justified complaints launched against the appraise. In addition, the appraisal process is set in a multi-year framework, currently spanning over the last three (3) years.
- In order to ensure that the principles of point (c) hereabove are met (the total variable remuneration does not limit the ability of the CIF to strengthen its capital base), the remuneration committee, which is entrusted with the duty of approving any variable remuneration component, is advised by the Head of the Risk Management Department, who is explicitly entrusted with the task, among others, of confirming that the total amount of proposed variable remuneration does not impede the ability of the CIF to strengthen its capital base.
- In relation to guaranteed variable remuneration (points (d) and (e) hereabove), it is indeed treated as exceptional, and it is subjected to approval by:
- the General Manager or the Chief Operations / Financial Officer of the Firm, in case the proposed payment does not satisfy the Proportionality Conditions [3]
- the Remuneration Committee, in cases where the Proportionality Conditions are satisfied. In such cases, an extraordinary meeting of the Remuneration Committee is called to deliberate on the matter. If the Remuneration Committee approves the payment of the sign-up bonus, the decision must be ratified by the Board of Directors.
- In relation to points (f) and (g) hereabove, the Firm adopts a two-branched approach, which on the one hand tries to ensure that the fixed element of remuneration is reasonable, thus reducing the possibility that members of staff will be induced to supplement their fixed salaries by resorting to extreme risk taking behavior in the hope of being rewarded with bonus payment, and on the other hand, sets indicative ratios of variable remuneration vs fixed remuneration. The salaries of members of staff (fixed remuneration) are reviewed at a bi-annual frequency, to ensure that they reflect any rise in the cost of living and that in general, they remain reasonable given the duties and responsibilities of each employee. In relation to the ratios of variable remuneration vis-Ё¤-vis fixed remuneration, they are well below the level of 100% stated in point (g)(i) hereabove, and thus it is very doubtful that the conditions of points (g)(ii) and (g)(iii) will ever be activated. The ratios of variable remuneration vis-Ё¤-vis fixed remuneration are subject to annual review to ensure that they are effective in relation to their intended purpose.
- In relation to points (l) (retained shares or other instruments), (m) (deferral) and (n) (performance adjustment) hereabove, based on the logic that such measures would be grossly disproportionate in relation to the payment of small bonus payments (which is usually our case), we introduced certain proportionality conditions for the application of these principles. The current proportionality conditions are:
- The variable remuneration is more than thirty three percent (33%) of total remuneration , and
- Total remuneration is more than six hundred thousand Euro (€600.000)
The purpose of the Diversity Policy is to promote the need of a wide range of qualities, professional and other background, skills and experience, temperament and perspective, irrespective of gender, age, race, ethnicity and other unfair criteria, within the Board of Directors, while ensuring compliance with the relevant Laws and Regulations, as well as Guidelines of the Cyprus Securities and Exchange Commission (hereinafter “CySEC”) and the Company’s internal policies and procedures.
In recent years, there has been a general consensus and strong trend towards Board diversification as the consolidated Directive 2013/36/EU introduced the requirement that Companies shall take into account the diversity of the Board of Directors when recruiting new members. Additionally, according to ESMA Guidelines every Company should have implemented a policy promoting the diversity on the Board of Directors, in order to promote a diversified pool of members, aiming to engage a broad set of qualities and competences when recruiting members of the Board of Directors, to achieve a variety of views and experiences and to facilitate independent opinions and sound decision-making within the Board of Directors.
The Nomination Committee of the Company emphasizes the benefits and necessity of having an adequately diverse Board of Directors which will include and take good advantage of gender and race diversity, age difference, difference in skills, expertise and industry experience, diversity of professional background and other differences between Directors.
Although diversity has not been precisely defined, it is related to having a range of many people that are different fr om each other, considering, among other, factors like age, race, gender, educational background and professional qualifications of Board members to make the Board wider and less homogenous.
Advantages of Board Diversity
Role of the Nomination Committee as regards the Diversity of the Board
The Nomination Committee will discuss and agree at least once per annum the principles, set targets and required measures to achieve diversity of the Board and shall recommend such targets set to the Board of Directors for further discussion, adoption and implementation. To be more specific, as part of the annual performance evaluation of the effectiveness of the Board, Board Committees and individual directors, the Nomination Committee will consider and weigh the balance of skills, experience, independence and knowledge of Board members and the diversity representation of the Board, including gender, race and ethnicity, age, how the Board works together as a unit, as well as other factors relevant to its efficient operation.
At the same time, the Nomination Committee will review the Diversity Policy upon new proposed director appointment, which will include an assessment of the effectiveness of the said Policy and its compliance with the applicable Laws, Regulations, EU Directives and Recommendations / Circulars of CySEC, etc. The Committee will discuss any revisions that may be required and recommend any such revisions and to the Board for approval. At any given time, the Board may make recommendations and take measures in order to improve diversity and review such progress accordingly.
Basis of Nomination and Appointment of Board Members
All Board appointments should be made primarily on merit, based on the skills, experience and ethics of directors, irrespective of factors such as race, colour, nationality / ethnicity, disability, age, gender, religion, sexual or political orientation, participation in trade unions or any other unfair and prejudicial criterion.
The above will ensure that Board appointments are entirely fair, objective and not prejudicial in any way whatsoever, thus enhancing the efficiency of the operations of the Board of Directors.
Gender Diversity
The Nomination Committee promotes the gender diversity in Board appointments and appointment of other key positions of the Company. This will enhance diversity in perspective in Olive Tree Capital Markets Limited’s operations, combining both masculine and feminine strengths, which aims at strengthening corporate performance and ensuring sound corporate governance.
Diversity in terms of Race and Ethnicity
The Nomination Committee recommends, to the greatest extent possible, and wh ere such suitable candidates are nominated and identified, variety in race and ethnicity in terms of Board appointments, which could bring in diversified experience from difference in culture, mentality and perspective. It is stressed that under no circumstances should any Board appointments be made based on factors of race or ethnicity but solely based on merit and skills.
Age Diversity
The Nomination Committee encourages age diversity to the extent that this combines the principles of drive, ambition, enthusiasm and hard work, with the experience and wisdom of older age. Under no circumstances should appointments be made based on age consideration, within, of course, reasonable limits which take into account the factor of professional experience, background and accreditations in the field.
Review and approval of the Policy
The Diversity Policy shall be reviewed by the Nomination Committee and duly amended and updated, whenever deemed necessary, in case of any change in the applicable legislative and regulatory framework or any changes in the Company’s internal policies and manual.