Corporate GovernanceGovernance overview
The Board is committed to achieving high standards of corporate governance, integrity and business ethics. We recognise the need to ensure an effective governance framework is in place to give all our stakeholders confidence that the business is effectively run, ensuring good outcomes for our clients and looking after the interests of the Group’s shareholders and other stakeholders.Board structure
The Board has established a sub-committee structure comprising Risk and Compliance, Audit, Remuneration and Nomination Committees. During the financial year ended 31 May 2018 the Group undertook internal and external reviews of the effectiveness of the Board, its sub-committees and the senior executive management framework. We created a new Senior Executive Team to execute the strategy determined by the Board, bringing together a senior team with responsibility for all our key operational areas.
Following the end of the financial year ended 31 May 2019 the Group has again reviewed its management and governance structure, implementing a number of changes designed to improve the management and governance of the Group’s key areas of operation, illustrated opposite.
The Senior Executive Team has been restructured into two new committees, comprising the Governance Committee and the Management Engagement Committee.
The Group’s investment and asset management business is managed through a single committee, which has been renamed the Investment Committee (formerly the Asset Management Executive Committee), which ensures risk and investment controls are applied consistently across our various products and services.
Each operating subsidiary is managed by its own board, which reports to the Management Engagement Committee. We believe these changes give the business the optimal management structure to secure continued growth.Corporate governance code
In March 2018 the AIM Rules were changed such that all AIM companies were obliged to apply a recognised corporate governance code from September 2018, providing details of that code on its website along with details of how the company complies with or departs from the code.
In July 2018 the Board resolved to adopt the Quoted Companies Alliance (“QCA”) revised corporate governance code (“QCA Code”), which requires the Group to apply ten principles focused on the pursuit of medium to long-term value for shareholders and also to publish certain related disclosures.
In preparing to adopt the QCA Code the Board reviewed the Group’s risk management framework and resolved to split the Audit, Risk and Compliance Committee into two committees: an Audit Committee and a separate Risk and Compliance Committee, reflecting the continued improvement of the Group’s three lines of defence model. The Group’s other governance arrangements remain unchanged.
Our Statement of Compliance with the QCA Corporate Governance Code can be found here:https://www.mattioliwoods.com/about/corporate-governance-code
Board of directors
The Board of Directors comprises three Executive Directors and three independent Non-Executive Directors. A short biography of each director is set out here
.Time commitments of Board members
The Group embraces the benefits that are brought by a Board from a range of business backgrounds and who are actively involved in other businesses. The Board also recognises its members must be able to dedicate sufficient time to the Company.
The Board has considered the time commitments of each director and is comfortable that each has sufficient available capacity to carry out the required duties for Mattioli Woods:
- Joanne Lake’s time commitment from her other directorships averages eight to nine working days per month.
- Ian Mattioli’s time commitment from his roles as Non-Executive Chairman of K3 Capital Group plc and Non-Executive Director of Custodian REIT plc average two and one and a half working days per month respectively.
- Nathan Imlach’s time commitment from his other appointments averages two to three working days per month.
- Murray Smith’s other business interests outside of the Group are trivial in time commitment.
- Carol Duncumb‘s time commitment from her other business interests outside of the Group averages nine to ten working days per month.
Imminent changes to the Board
- Anne Gunther’s time commitment from her other directorships averages four and a half working days per month.
Murray Smith, Group Managing Director, has decided to stand down from the Board at the Company’s AGM on 21 October 2019 to continue in a full-time role as Founder Director to the Group, where his focus will be on his client portfolio, acquisitions and acting as an ambassador for Mattioli Woods.
Murray has been instrumental to the success of the Group and we will continue to benefit from his experience and insight in this new role, with Murray’s management responsibilities being handed over to our Deputy Group Managing Director, Michael Wright. Following Murray stepping down as a director the Company will have
a Board comprising a majority of independent directors, which we believe represents the right governance structure for the business.
Please click here for a short biography of each director. https://www.mattioliwoods.com/meet-the-team/boardmembers
Operation of the Board
The Board is responsible to shareholders for the proper management of the Group and has a formal schedule of matters specifically reserved to it for decision. These include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business and approval of budgets and financial statements.
Other matters are delegated to the management team, supported by policies for reporting to the Board. The Company maintains appropriate insurance cover in respect of legal action against the Company’s directors, but no cover exists in the event that a director is found to have acted fraudulently or dishonestly.
The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, usually a week in advance of each Board meeting.
The roles of Chairman and Chief Executive are distinct, as set out in writing and agreed by the Board. The Chairman is responsible for the effectiveness of the Board, directing strategy and ensuring communication with shareholders. The Chief Executive is responsible for overseeing the delivery of this strategy and the day-to-day management of the Group by the executive management team. The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business.
The Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. The Board does not consider the Non-Executive Directors’ shareholdings to impinge on their independence. The Non-Executive Directors provide a strong independent element to the Board and bring experience at a senior level of business operations and strategy. Anne Gunther is the Senior Independent Director.
All directors have access to the Company Secretary, who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. Any director, on appointment and throughout their service, is entitled to receive any training they consider necessary to fulfil their responsibilities effectively.
The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, and is the principal forum for directing the business of the Group.Board committees
The Board has delegated authority to four committees. The Chairman of each committee provides a report of any meeting of that committee at the next Board meeting. The Chairman of each committee is present at the AGM to answer questions from shareholders.Risk and Compliance Committee
The Risk and Compliance Committee comprises Anne Gunther (Chairman), Carol Duncumb, Joanne Lake, Ian Mattioli as CEO and temporary Compliance Oversight Function. The committee is in the process of replacing Ian with a new appointment to the Compliance Oversight Function. Senior managers and representatives from the internal audit, risk and compliance functions attend committee meetings as necessary.
The Risk and Compliance Committee is principally responsible for monitoring identified risks and the effectiveness of mitigating action, keeping risk assessment processes under review, reviewing the impact of key regulatory changes on the Group, assessing material breaches of risk limits and regulations as well as reviewing client complaints.Risk management framework
The Group’s risk management framework is designed to ensure risks are identified, managed and reported effectively. The Group has been investing in its risk management framework to meet the requirements of key regulatory changes, such as MiFID II, the GDPR and the SM&CR, and the risk management framework remains subject to ongoing review.
We continue to apply a ‘three lines of defence’ model to support our risk management framework, with responsibility and accountability for risk management summarised as follows:
- First line: Senior management and operational business units are responsible for managing risks, by developing and maintaining effective internal controls to mitigate risk. First-line systems and controls are employed to ensure business activities are conducted in compliance with internal policies and procedures. First-line supervision teams carry out monitoring of business activities on a day-to-day basis.
- Second line: The risk, compliance and anti-money laundering functions maintain a level of independence from the first line. They are responsible for providing oversight and challenge of the first line’s day-to-day management, monitoring and reporting of risks to both senior management and governing bodies.
- Third line: The internal audit function is responsible for providing independent assurance to both senior management and governing bodies as to the effectiveness of the group’s governance, risk management and internal controls.
Output from first, second and third-line monitoring is reported to the managers and management information is reported to the Executive Risk and Compliance Committee and the Risk and Compliance Committee.Risk appetite
Risk appetite is defined as both the amount and type of risk the Group is prepared to accept or retain in pursuit of our strategy. Our appetite is subject to regular review to ensure it remains aligned to our strategic goals. At least annually, the Board, Executive Risk and Compliance Committee and the Risk and Compliance Committee will formally review and approve the Group’s risk appetite statement and assess whether the firm has operated in accordance with the stated risk appetite measures during the year.
Notwithstanding its continued expectations for business growth, the Board retains a relatively low overall appetite for risk, ensuring that our internal controls mitigate risk to appropriate levels.Risk assessment process
Identified risks are tracked in a department-level risk register and used as the basis for a consolidated risk register that provides the Risk and Compliance Committee with an overview of the key risks across the organisation. The Board and senior management are actively involved in a continuous risk assessment process as part of our risk management framework, supported by the annual Internal Capital Adequacy Assessment Process (“ICAAP”), which assesses the principal risks facing the Group.
Stress tests include consideration of the impact of a number of severe but plausible events that could impact the business. The work also takes account of the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks.
The Group’s risk assessment process considers both the impact and likelihood of risk events which could materialise, affecting the delivery of strategic goals and annual business plans. A top-down and bottom-up approach ensures that our assessment of key risks is challenged and reviewed on a regular basis, with the Board and its committees receiving regular reports and information from senior management, operational business units and the risk oversight functions.Activities during the year
The committee met eight times during the year (once in conjunction with the now separate Audit Committee) with future meetings to be structured around the financial calendar of the Company. The committee’s activities during the year included:
- Review and challenge of the key components of the Group’s risk management framework;
- Review and challenge of the ICAAP, exploring scenarios and stress tests to determine an appropriate regulatory capital requirement prior to recommendation to the Board;
- Review and challenge of the Group’s treating customers fairly policy and outcomes;
- Review of the Group’s training and competence regime;
- Regulatory changes including MiFID II, GDPR and SM&CR were considered in discussion with management and their impact on the Group assessed;
- Review of the risks associated with the development of the New Walk office in Leicester and subsequent move, including IT infrastructure changes; and
- Review of recommendation of the Group’s risk appetite statement and tolerance for key risks to the Board.
The Audit Committee comprises Anne Gunther (Chairman), Carol Duncumb and Joanne Lake. Anne Gunther is a Chartered Banker and the Board is satisfied that all members of the committee have recent and relevant financial experience. The Board believes the committee is independent, with all members being Non-Executive Directors.
The key responsibilities of the Audit Committee are:
- To review the reporting of financial and other information to the shareholders of the Company and to monitor the integrity of the financial statements;
- To review the Group’s accounting procedures and provide oversight of significant judgement areas;
- To review the firm’s internal controls and effectiveness of the internal audit function;
- To review the effectiveness of the external audit process and the independence and objectivity of the external auditors; and
- To report to the Board on how it has discharged its responsibilities.
Committee meetings are normally attended by the Chief Executive and the Chief Financial Officer and by representatives of the external and internal auditors by way of invitation. The presence of other senior executives from the Group may be requested. The committee meets with representatives of the external auditors without management present at least once a year.Activities during the year
The committee met five times during the year (once in conjunction with the now separate Risk and Compliance Committee) with future meetings to be structured around the financial calendar of the Company. The committee considered the significant financial and audit issues, the judgements made in connection with the financial statements and reviewed the narrative within the Annual Report and the Interim Report.
During the year the Audit Committee reviewed the operation of the internal audit function and concluded that outsourcing was the best way to maintain a high quality function. In light of an ever-changing regulatory environment, outsourcing gives the Group access to greater skills externally, while having the ability to shrink or expand our internal audit activities to meet the ongoing demands of the business.
After concluding a competitive tender process, RSM Risk Assurance Services LLP were appointed to provide internal audit services to the Group in December 2018.
The committee also considered the appointment of, and fees payable to, the external auditor and discussed with them the scope of the interim review and annual audit.
Specific audit issues the committee discussed included:
- Management’s assessment of the fair value of the call option to acquire the remaining 51% of Amati as at 31 May 2019.
- Provisions recognised in respect of contingent consideration payable on past business combinations and management’s key assumptions and estimates applied in reaching these recognition and measurement decisions.
- Additions made during the year as part of the Group’s development of a new office at New Walk in Leicester to ensure treatment remains in accordance with IAS 16.
- The purchase price allocation and fair value accounting for the acquisitions of Broughtons and SSAS Solutions during the year.
- The disclosure of the impact of IFRS 9, IFRS 15 and IFRS 16 on the financial statements for the year ended 31 May 2019.
An analysis of fees payable to the external audit firm in respect of audit and non-audit services during the year is set out in Note 7 to the financial statements. The Company is satisfied the external auditor remains independent in the discharge of their audit responsibilities.
The Audit Committee determined that the audit would be put out to tender in 2018. Three audit firms were invited to participate in the process. No contractual obligations restricted the Audit Committee’s choice of external auditor. Having concluded a competitive tender in line with best practice, Deloitte LLP were appointed at the Company’s AGM in October 2018.Internal Audit
The internal audit function is responsible for providing assurance on the internal controls related to the Group’s key activities. Our internal audit activity is based around a strategic approach to cyclical internal audit along with consideration of the Group’s key priorities and risks. This approach is designed to provide assurance over key areas of FCA oversight, including; conduct risk management, complaints,
outsourcing and financial crime and whistleblowing. During the year the internal audit function engaged in a number of activities, including:
- Developing our internal audit plan based on an analysis of the Group’s corporate objectives, risk profile and assurance framework, as well as other factors such as emerging issues in our sector;
- Audits over the Group’s key financial controls, client payroll and benefit payments, operational resilience, general IT controls and cyber risk management. Each review identified control improvements to enhance our business operations; and
- Consultancy-style reviews, where internal audit has partnered with the business to strengthen a number of key processes.
As the third line of defence, the internal audit function (together with the external auditors in connection with their audit of the financial statements) is building risk awareness within the organisation by challenging the first and second lines of defence to continue improving the controls framework.Remuneration Committee
The Remuneration Committee comprises Carol Duncumb (Chairman), Joanne Lake and Anne Gunther. The committee meets not less than twice a year. It is responsible for determining and reviewing the Group’s policy on executive remuneration and other benefits and terms of employment, including performance related bonuses and share options. The committee also administers the operation of the share option and share incentive schemes established by the Company.
The members of the Remuneration Committee have no personal interest in the outcome of their decisions and seek to serve the interests of shareholders to ensure the continuing success of the Company. The remuneration of the Non-Executive Directors is determined by the Board itself. No director is permitted to participate in decisions concerning their own remuneration.
The committee met three times during the year with key items considered including:
- The Group’s remuneration policy;
- Annual review of Executive Directors’ and other senior managers’ base salaries and bonus arrangements;
- Awards to be granted under the share option and share incentive schemes established by the Company;
- Trends in executive pay in the wider market; and
- The implications new corporate governance requirements may have for the design of the Group’s remuneration policy and remuneration disclosures.
The Committee continues to review the Group’s long-term incentive plans to ensure it can continue to attract, retain and incentivise appropriately qualified staff to achieve its goals. Nomination Committee
The Nomination Committee comprises Joanne Lake (Chairman), Carol Duncumb and Anne Gunther. The Committee is responsible for reviewing the size, structure and composition of the Board, establishing appropriate succession plans for the Executive Directors and other senior executives in the Group and for the nomination of candidates to fill Board vacancies where required.
The committee works in close consultation with the Executive Directors and met four times during the year, with the main items being considered including Board structure, the possibility of expanding the number of non-executive directors on the Board and management succession.Meetings and attendance
All directors are encouraged to attend all Board meetings and meetings of Committees of which they are members. Directors’ attendance at meetings during the year (including the AGM) was as follows:
These committees will form part of the Corporate Governance framework, but are not sub-committees of the Board. The main committees comprise the Governance Committee, the Management Engagement Committee, the Investment Committee and the Executive Risk and Compliance Committee.Governance Committee
The Board strongly believes that good governance and strong, responsible, balanced leadership by the Board are critical to creating long-term shareholder value and business success. The committee’s role is to assist the Board in shaping the strategy, culture and ethical values of the Group, while supporting the Management Engagement Committee in the day to day management of Mattioli Woods and its subsidiaries.
The key responsibilities of the committee are to:
- Take a leadership role in shaping the corporate governance principles, culture and ethical values of the Group in line with the Group’s strategic priorities;
- Oversee the brand and reputation of the Group, ensuring that reputational risk is consistent with the risk appetite approved by the Board and the creation of long-term shareholder value;
- Develop strategy and growth initiatives, such as possible acquisitions and new products and services;
- Implement the agreed strategy and support the day-to-day management of the Group by the Management Engagement Committee;
- Review and discuss the annual business plan and budget prior to its submission to the Board for approval;
- Oversee the Group’s compliance with its statutory and regulatory obligations, including conduct of the firm and treating customers fairly; and
- Oversee the Group’s conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for the Group’s corporate responsibility agenda and related activities and advising the Board and management on these matters.
The Governance Committee is chaired by the Chief Executive and comprises functional heads from the appropriate disciplines.Management Engagement Committee
The Board has delegated its day-to-day operational authority to the Management Engagement Committee, subject to a list of matters which are reserved for decision by the Governance Committee or the full Board only. The Management Engagement Committee is primarily responsible for:
- Developing and monitoring all aspects of the Group’s business on a continuing basis;
- Implementing the business strategy and business plans agreed by the Board from time to time;
- Ensuring that day-to-day operations are conducted in accordance with the relevant regulatory and statutory requirements;
- Monitoring the management and performance of the Group‘s operating subsidiaries (including their results compared to budget, risks and regulatory compliance); and
- Reviewing employee talent management and development programmes, ensuring they take into account diversity, including gender.
The Management Engagement Committee meets at least monthly but more frequently if required. The committee is chaired by the Chief Executive and committee meetings may be attended by any number of a broad range of senior managers from across the Group, depending on the meeting agenda.Investment Committee
The Board has delegated authority to the Investment Committee to oversee the Group’s investment management approach, developing the ‘house view’ on economics, investment markets and asset allocation; and considering how the Group should best apply these views.
In particular, the Investment Committee is responsible for developing and implementing the Group’s asset management strategy, for developing and monitoring all aspects of the Group’s investment business on a continuing basis, receiving reports from the board of Custodian Capital, the Structured Products Fund Oversight Committee and the Multi-Asset Team (including the Asset Allocation Committee). The committee is also responsible for ensuring that the Group’s day-to-day investment and asset management operations are conducted in accordance with the relevant regulatory and statutory requirements through the investment research and investment operations teams.
The Investment Committee meets at least six times a year but more frequently if required. The committee is chaired by the Chief Investment Officer and comprises senior members of the investment, wealth management, technical and compliance functions.Executive Risk and Compliance Committee
The Board has delegated authority to the Executive Risk and Compliance Committee to oversee the operation of the Group’s risk and compliance framework and activity. The Executive Risk and Compliance Committee is responsible for ensuring that risk, compliance and internal audit are considered, reviewed and actions implemented across all areas of the Group including wealth management advice, asset management, pension administration and employee benefits. The committee is also responsible for ensuring that risks are fully considered in context of the Group’s ICAAP and the impact on the Group’s capital requirements.
The Executive Risk and Compliance Committee meets at least four times a year but more frequently if required. The committee is chaired by the Compliance Oversight Function and comprises senior members of the Group’s management and compliance function.Induction, training and performance evaluation
New directors receive an induction on their appointment covering the activities of the Group, its key business and financial risks, the terms of reference of the Board and its committees and the latest financial information.
The Chairman ensures directors update their skills, knowledge and familiarity with the Group as required to fulfil their roles on the Board and its committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes to the AIM Rules, requirements under the Companies Acts and other regulatory matters. All directors have access to independent professional advice at the Company’s expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chairman or two other directors, one of whom is a Non-Executive. Evaluation of the Board’s performance
During the year ended 31 May 2018 an external review of the Board’s effectiveness was undertaken by an independent third party. This involved one-to-one interviews with directors and a review of Board and Board committee papers and minutes. The key points raised in the review were around board composition and succession planning.
In response, we reduced the size of our Board to eliminate duplication of documentation and discussion between the Board and the executive management team, ensuring clearer lines of responsibility within the management team and creating a balanced Board of three Executive Directors and three Non-Executive Directors.
The Board intends to undertake a self-evaluation during the financial year ending 31 May 2020 and annually thereafter. Individual appraisal of each director’s performance is undertaken either by the Chief Executive Officer or Chairman each year and involves meetings with each director on a one-to-one basis. The Non-Executive Directors, led by the Senior Independent Director, carry out an appraisal of the performance of the Chairman and Chief Executive Officer. Retirement and re-election
All directors are subject to election by shareholders after their appointment and to re-election thereafter at intervals of no more than three years.
Non-Executive Directors’ appointments are initially for 12 months, and continue thereafter until terminated by either party giving six months’ prior written notice to expire at any time on or after the initial 12 month period. The terms and conditions of appointment of the Non- Executive Directors are available for inspection at the Company’s registered office during normal business hours and prior to the AGM.Communications with shareholders
The Board is committed to maintaining an ongoing dialogue with the Company’s shareholders. The principal methods of communication with private investors remain the Annual Report and financial statements, the Interim Report, the AGM and the Group’s website (www.mattioliwoods.com
It is intended that all directors will attend each AGM and shareholders will be given the opportunity to ask questions at the AGM on 21 October 2019. In addition, the Chairman, Chief Executive Officer and Chief Financial Officer welcome dialogue with individual institutional shareholders to understand their views and feed these back to the Board. General presentations are also given to analysts and investors covering the annual and interim results.
Details of the Company’s major shareholders can be found here.https://www.mattioliwoods.com/about/shareholder-information
Shareholders who wish to contact the Company can do so here. https://www.mattioliwoods.com/contactInternal control and risk management
The Board is ultimately responsible for the Group’s system of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can only provide reasonable not absolute assurance against material misstatement or loss.
In accordance with the guidance of the Turnbull Committee on internal control, an ongoing process has been established for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of approval of the Annual Report and financial statements.
The Board routinely reviews the effectiveness of the system of internal control and risk management to ensure controls react to changes in the nature of the Group’s operations.
The Group maintains appropriate insurance cover and reviews the adequacy of the cover regularly, in conjunction with the Group’s insurance brokers.
There are clearly defined procedures for reviewing and approving all bids, acquisitions and capital expenditure within the Group.
On behalf of the BoardNathan Imlach
Chief Financial OfficerLast updated: 19 September 2019