DISCLOSURES & MARKET DISCIPLINE

REPORT

According to Part Six of Regulation (EU) 2019/2033 of the European Parliament

and of the Council on the prudential requirements of investment firms

FOR THE YEAR ENDED 31 DECEMBER 2023

April 2024

            Disclosures & Market Discipline Report 2023  
VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14                  2 
CONTENTS   
 Introduction ........................................................................................................................ 4 
1.  Group Information ........................................................................................................ 4 
2.  Scope of application ..................................................................................................... 5 
3.  Classification and prudential requirements .................................................................. 6 
4.  Regulatory framework .................................................................................................. 7 
5.  Risk management objectives and policies .................................................................... 8 
6. Declaration of the Management Body ............................................................................. 11 
 Corporate Governance .................................................................................................... 12 
1.  Board of Directors ...................................................................................................... 12 
2.  Committees ................................................................................................................. 12 
3.  Policy on Recruitment ................................................................................................ 13 
4.  Number of Directorships held by members of the Board ........................................... 13 
5.  Policy on Diversity ..................................................................................................... 14 
6.  Information flow on risk to the management body .................................................... 14 
 Own Funds ........................................................................................................................ 16 
1. Regulatory Own funds ..................................................................................................... 16 
2. Main features of capital instruments ............................................................................... 18 
 Own funds Requirements ................................................................................................ 20 
1.  Own Funds Requirement ............................................................................................ 20 
2.  Capital Ratios ............................................................................................................. 29 
3.  Liquidity Requirement ................................................................................................ 30 
4.  Reporting requirements .............................................................................................. 31 
5.  Other Material Risks ................................................................................................... 32 
 Internal Capital Adequacy and Risk Assessment Process ........................................... 37 
 Remuneration policy ........................................................................................................ 38 
 Investment Policy ............................................................................................................. 43 
 Environmental, social and governance risks ................................................................. 44 
 Appendix – Specific References to the IFR ................................................................... 45 
 
 
 
 
 
 
 

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LIST OF TABLES 
Table 1: Company License Information (based on the First Appendix of the Law 87(I)/2017) .. 5 
Table 2: Basis of Consolidation of Group entities for regulatory purposes ................................. 6 
Table 3: Threshold Criteria ........................................................................................................... 6 
Table 4: Risk Appetite areas ....................................................................................................... 10 
Table 5: Number of Directorships of the members of the Board of Directors
*
 .......................... 14 
Table 6: Information flow on risk to management body ............................................................ 15 
Table 7: IF CC1.01 - Composition of regulatory own funds as at 31 December 2023 .............. 16 
Table 8: EU IF CCA - Main features of own instruments issued by the firm ............................ 18 
Table 9: Balance Sheet Reconciliation ....................................................................................... 19 
Table 10: Fixed Overheads Requirement ................................................................................... 20 
Table 11: Total CMH (average amounts) ................................................................................... 22 
Table 12:K-NPR capital requirement ......................................................................................... 23 
Table 13: Foreign Exchange Risk capital requirements ............................................................. 24 
Table 14: Capital requirements for Commodities risk ............................................................... 25 
Table 15: Position risks in equities ............................................................................................. 26 
Table 16: K-TCD Exposures ...................................................................................................... 27 
Table 17: Total DTF (average amounts) .................................................................................... 28 
Table 18: K-Factors Results ....................................................................................................... 29 
Table 19: Own Funds ................................................................................................................. 30 
Table 20: Liquidity Requirements .............................................................................................. 30 
Table 21: Large Exposure Limits ............................................................................................... 32 
Table 22: Remuneration split of staff whose activities have a material impact on the risk profile 
of the Company. ......................................................................................................................... 41 
Table 23: Remuneration split by business area .......................................................................... 42 
 

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1. INTRODUCTION

1.1.Group Information

Versanto Ltd (hereinafter, the ‘Group’) was incorporated in the Republic of Cyprus on 18

August 2020 as a limited liability company with registration number HE 412086 and it is the

parent company of VPR Safe Financial Group Ltd (hereinafter, the ‘Company’ or ‘CIF’) which

was incorporated in the Republic of Cyprus on 13 May 2013 as a private limited liability

company with registration number ΗΕ 322134. The Company obtained a Cyprus Investment

Firm (‘CIF’) license from the Cyprus Securities and Exchange Commission (‘CySEC’), CIF

licence No. 36/14 on 3 June 2014 to provide the following Investment and Ancillary Services in

trading with the Financial Instruments listed below, in accordance with Part I, II and III of the

Law 87(I)/2017:

Investment Services:

• Reception and transmission of orders in relation to one or more financial instruments (1)

• Execution of orders on behalf of clients (2)

• Dealing on own account (3)

Note: In brackets (...) is the number of the investment service as referred in Law 87(I)/2017.

Ancillary Services:

• Safekeeping and administration of financial instruments for the account of clients,

including custodianship and related services such as cash/collateral management (1)

• Foreign exchange services where these are connected to the provision of investment

services. (4)

Note: In brackets (...) is the number of the ancillary service as referred in Law 87(I)/2017.

Financial Instruments:

1. Transferable Securities

2. Money Market Instruments

3. Units in Collective Investment Undertakings

4. Options, futures, swaps, forward rate agreements and any other derivative contracts

relating to securities, currencies, interest rates or yields, or other derivatives instruments,

financial indices or financial measures which may be settled physically or in cash

5. Options, futures, swaps, forward rate agreements and any other derivative contracts

relating to commodities that must be settled in cash or may be settled in cash at the option

of one of the parties (otherwise than by reason of a default or other termination event)

6. Options, futures, swaps, and any other derivative contract relating to commodities that

can be physically settled provided that they are traded on a regulated market or/and an

MTF

7. Options, futures, swaps, forwards and any other derivative contracts relating to

commodities, that can be physically settled not otherwise mentioned in point 6 of Part III

and not being for commercial purposes, which have the characteristics of other derivative

financial instruments, having regard to whether, inter alia, they are cleared and settled

through recognised clearing houses or are subject to regular margin calls

8. Derivative instruments for the transfer of credit risk

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9. Financial contracts for differences

10. Options, futures, swaps, forward rate agreements and any other derivative contracts

relating to climatic variables, freight rates, emission allowances or inflation rates or other

official economic statistics that must be settled in cash or may be settled in cash at the

option of one of the parties (otherwise than by reason of a default or other termination

event), as well as any other derivative contract relating to assets, rights, obligations,

indices and measures not otherwise mentioned in this Part, which have the characteristics

of other derivative financial instruments, having regard to whether, inter alia, they are

traded on a regulated market or an MTF, are cleared and settled through recognised

clearing houses or are subject to regular margin calls.

The table below illustrates the current licence information of the Company:

Table 1: Company License Information (based on the First Appendix of the Law

87(I)/2017)

Investment Services and Activities

Ancillary Services

Financial Instruments

✓

1.2.Scope of application

The Disclosures & Market Discipline Report (the ‘Report’) is prepared in accordance with the

disclosure requirements as laid out in Part Six of the IFR. Investment firms are required to

disclose their capital resources, capital requirements, remuneration policies, practices and

governance standards.

The Report has as a starting point the financial information used in the Group Financial

Statements which are prepared in accordance with the International Financial Reporting

Standards (“IFRS”). As the two documents serve different purposes, the reported figures

illustrate differences, which lie on the differences of the fundamental concepts between the IFR

and the IFRS. The Group is required to comply with the market disclosures requirement on a

consolidated basis. The subsidiary companies, their activities and their consolidation method as

at 31 December 2023 are presented in the table below.

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Table 2: Basis of Consolidation of Group entities for regulatory purposes

Name of the entity

Method of

accounting

consolidation

Method of regulatory

consolidation

Description of

the entity

VPR Safe Financial

Group Ltd

Full consolidation

Investment Firm

Versanto Ltd

Full consolidation

Holding Entity

1.3.Classification and prudential requirements

Under current prudential regulatory framework, Investment Firms Directive (EU) 2019/2034

(“IFD”) and Investment Firm Regulation, Regulation (EU) 2019/2033 (“IFR”), all investment

firms are classified as Class 1, 2 or 3 Investment Firms, based on their activities, systemic

importance, size and interconnectedness.

Class 1 Investment Firms are the largest and most interconnected investment firms, with risk

profiles similar to those of significant credit institutions, have equal treatment with credit

institutions in the sense of a level playing field accordingly and they fall entirely under the CRR.

Investment Firms categorized as Class 2 and Class 3 must comply with the provisions of the

IFR/IFD prudential regulatory regime for investment firms introduced back in June 2021.

CIFs that meet all of the below criteria are categorised as Class 3 Investment Firms, while when

they exceed any of the following specific size thresholds, are categorised as Class 2 Investment

Firms.

Table 3: Threshold Criteria

No.

Metric

Thresholds

Assets Under Management

<€1.2 billion

Client orders handled – cash trades

< €100 million per day

Client orders handled – derivative trades

<€1 billion per day

Assets safeguarded and administered

zero

Client money held

zero

On- and off-balance sheet total

< €100 million

Total annual gross revenue

< €30 million

Further to the above, the Company is categorized as a Class 2 Investment Firm since it does

not meet all of the above criteria and as such it should maintain own funds of at least the higher

between:

A. Permanent minimum capital requirement

The permanent minimum capital requirement of the Group is €750k since it is authorized to

provide the investment service of dealing on own account.

B. Fixed overhead requirements

The Fixed Overheads Requirement is calculated as one quarter (¼) of the previous year fixed

expenses (based on audited figures).

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C. K-Factors requirement

The new K-Factors are quantitative indicators that reflect the risk that the new prudential regime

intends to address. Specifically, capital requirements from applying the K-factors formula

(pursuant to Article 15 of the IFR) is the sum of Risk to Client (‘RtC’), Risk to Market (‘RtM’)

and Risk to Firm (‘RtF’) proxies.

1.4.Regulatory framework

The Report has been prepared in accordance with the new regulatory regime for investment firms

the European Parliament has adopted, the IFR and the IFD as well as the relevant provisions of

the Law 165(I)/2021 “The Prudential Supervisions for Investment Firms Law of 2021” (the

“Law”) and the Law 164(I)/2021, amending Law 97(I)/2021, “The Capital Adequacy Investment

Firms Law of 2021”.

The IFR establishes the prudential requirements in terms of own funds, level of minimum capital,

concentration risk, liquidity requirements and level of activity with respect to small and non-

interconnected investment firms. Furthermore, IFR introduced significant changes in the

prudential regulatory regime applicable to Investment Firms including a new classification

system, an amended minimum initial capital and minimum capital ratios, changes to the

calculation of the capital requirements, the reporting requirements and the internal governance

policies and the introduction of the K-Factors methodology and new measures relating to

liquidity requirements, large exposures and consolidation requirements.

The Regulatory framework consists of:

• Basic Prudential Requirement - Covers minimum capital and liquidity requirements.

• Internal Capital and Liquidity Adequacy Assessment – Regulates the investment

firm’s accountability to the regulator for capital and liquidity adequacy. If the regulator

deems the capital to be insufficient, a corrective requirement can be imposed on the

company in the form of what is known as a ‘SREP’.

• Disclosures Requirement - require the disclosure of information regarding the

prudential requirements, risk management and principles of the remuneration policy.

The Group has a formal policy, approved by the Board, which details its approach in complying

fully with the market disclosures requirement as laid out in Part Six of the IFR.

The provisions on disclosure requirements are described in Articles 46 to 53 of the IFR. In

addition, these disclosures must be verified by the external auditors of the CIF. The CIF will be

responsible to submit its external auditors’ verification report to CySEC. The Group has included

its risk management disclosures on its website.

Materiality is based on the criterion that the omission or misstatement of information would be

likely to change or influence the decision of a reader relying on that information for the purpose

of making economic decisions. Where the Group has considered a disclosure to be immaterial,

this was not included in the document.

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Frequency

The Group’s policy is to publish the disclosures required on an annual basis. The frequency of

disclosure will be reviewed should there be a material change in approach used for the calculation

of capital, business structure or regulatory requirements.

Location of publication

The Disclosures & Market Discipline Report is published on its website.

Verification

The Disclosures & Market Discipline Report is subject to internal review and validation prior to

being submitted to the Board for approval. The Report has been reviewed and approved by the

Board. In addition, the Remuneration disclosures have been reviewed by the Risk Manager.

1.5.Risk management objectives and policies

To ensure effective risk management, the Group has adopted the Three Lines of Defence model,

with clearly defined roles and responsibilities.

First Line of Defence: Managers are 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 the Group’s policies and

where appropriate defined thresholds. First Line of Defence acts as an early warning mechanism

for identifying (or remedying) risks or failures.

Second Line of Defence – The Risk Management Function is responsible for proposing to the

Board appropriate objectives and measures to define the Group’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. The

Risk Management Function will leverage their expertise by providing frameworks, tools and

techniques to assist management in meeting their responsibilities, as well as acting as a central

coordinator to identify enterprise-wide risks and make recommendations to address them.

Integral to the mission of Second Line of Defence is identifying risk areas, detecting

situations/activities, in need of monitoring and developing policies to formalise risk assessment,

mitigation and monitoring.

Third Line of Defence - Comprised by the Internal Audit Function which is responsible for

providing assurance to the Board on the adequacy of design and operational effectiveness of the

systems of internal controls. Internal Audit undertakes on-site inspections/visits to ensure that

the responsibilities of each Function are discharged properly (i.e. soundly, honestly and

professionally) as well as reviewing the Group’s relevant policies and procedures. Internal Audit

works closely with both the First and Second Lines of Defence to ensure that its findings and

recommendations are taken into consideration and followed, as applicable.

1.5.1. Risk Management Framework

Managing risk effectively in a Company operating in a continuously changing risk environment

requires a strong risk management culture. As a result, the Group has established an effective

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risk oversight structure and the necessary internal organisational controls to ensure that the Group

undertakes the following:

• The adequate risk identification and management

• The establishment of the necessary policies and procedures

• The setting and monitoring of the relevant limits and

• Compliance with the applicable legislation

The Board meets on a regular basis and receives updates on risk and regulatory capital matters

from management. The Board reviews regularly (at least annually) written reports concerning

compliance, risk management and internal audit policies, procedures and work as well as the

Group’s risk management policies and procedures as implemented by Management.

As part of its business activities, the Group faces a variety of risks, the most significant of which

are described further below. the Group holds regulatory capital against three all-encompassing

main types of risk: credit risk, market risk and operational risk.

1.5.2. Risk Statement

The Group's activities expose it to a variety of risks, and in particular to credit risk, market risk,

operational risk, compliance risk, regulatory risk, reputational risk, group risk, strategic risk,

liquidity risk, conduct risk etc. the Group, through its operations, has significant exposure to the

economies and financial markets. As regards the management of the risks arising from the current

macroeconomic and political uncertainty (heightened inflation, Ukrainian crisis, climate crisis

etc.), the Group is following the local government guidelines, enhancing its onboarding

procedures and closely monitoring its capital and liquidity positions.

Risk Strategy

The risk strategy of the Group is the responsibility of the Board, which formulates it and is

responsible for monitoring its implementation. This is achieved through the development of risk

management processes and procedures as well as through an assessment of the risks undertaken

and the effectiveness of the risk management framework, given the Group’s business model. One

important characteristic of the Group’s risk strategy is the alignment with the strategic and

operational targets that are set by the Board.

The risk strategy of the Group aims to provide to both Senior Management and employees a

general risk framework for the management of the different types of risk in line with the overall

risk management and risk bearing capacity of the Group.

The Group recognizes the importance of risk management to its business’ success and therefore

the overall objective is to establish effective risk management policies that are able to mitigate

the Group’s exposure to the various risks.

Risk Appetite

Risk appetite is the level and type of risk a firm is able and willing to assume in its exposures

and business activities, given its business objectives and obligations to stakeholders. Risk

appetite is generally expressed through both quantitative and qualitative means and should

consider extreme conditions, events and outcomes.

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In addition, risk appetite should reflect potential impact on earnings, capital and

funding/liquidity. The Group has a low-risk appetite in respect to investing and to managing

business and operational activities.

The Group is assessing its risk appetite in respect to investing and to managing business and

operational activities while the Group’s Risk Appetite Statement is prepared by the Risk Manager

and approved by the Board of Directors.

Table 4: Risk Appetite areas

Indicator

Normal

Warning

Limit

Common Equity Tier 1 Ratio

>100%

<75%

56%

AT1 Capital Ratio

>125%

<100%

75%

Total Capital Ratio

>150%

<125%

100%

Own Funds Requirement

>€1,500k

<€1,500k

€1,328k

Liquid Assets

>€500k

<€500k

€421k

Return on Assets

≥5.00%

<5.00%

0.00%

Retained Earnings / Total Equity

≥10.00%

<10.00%

5.00%

Notes

1. The level of the indicator is within the acceptable limits as per the Group’s risk appetite.

2. The Group should take proactive actions in order to ensure that the level of the indicator will

remain above the acceptable limits.

3. The level of the indicator falls below the acceptable limits and as such the Group should

proceed with the required actions in order to restore the level of the said indicator to the

normal predefined levels.

4. Additional own funds requirement and additional 18.75% total capital ratio requirement as per

the paragraph 18 of the Law 20(I)/2016 have been taken into consideration for Normal and

Warning thresholds.

The Risk Appetite framework has been designed to create links to the strategic long-term plan,

capital planning and the Group’s risk management framework.

The Board approves the Group’s corporate strategy, business plans, budget, long term plan and

ICARA. the Group employs mitigation techniques defined within the Group’s policies, to ensure

risks are managed within it’s Risk Appetite.

1.5.3. Risk Culture

Risk culture is a critical element in the Group’s risk management framework and procedures.

Management considers risk awareness and risk culture within the Group as an important part

of the effective risk management process.

Ethical behaviour is a key component of the strong risk culture and its importance is also

continuously emphasised by the management.

The Group is committed to embedding a strong risk culture throughout the business where

everyone understands the risks they personally manage and are empowered and qualified to

take accountability for them. The Group embraces a culture where each of the business areas

are encouraged to take risk–based decisions, while knowing when to escalate or seek advice.

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1.6. Declaration of the Management Body

The Board is required to proceed with an annual declaration on the adequacy of the Group’s risk

management framework and ensure that the risk management arrangements and systems of

financial and internal control in place are in line with the Group’s risk profile.

The Group’s risk management framework is designed to identify, assess, mitigate and monitor

all sources of risk that could have a material impact on the Group’s operations.

The Board considers that the Group has in place adequate systems and controls with regards to

its size, risk profile and strategy and an appropriate array of assurance mechanisms, properly

resourced and skilled, to avoid or minimise loss. Key ratios and figures representing interaction

of the risk profile and the stated risk tolerances are deemed to be proprietary information.

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2. CORPORATE GOVERNANCE

The Group’s systems of risk management and internal control include risk assessment,

management or mitigation of risks, including the use of control processes, information and

communication systems and processes for monitoring and reviewing their continuing

effectiveness. The risk management and internal control systems are embedded in the operations

of the Company and are capable of responding quickly to evolving business risks, whether they

arise from factors within the Company or from changes in the business environment.

2.1. Board of Directors

The Board comprises of two executive directors and two non-executive directors. The

management body has the ultimate and overall responsibility for the investment firm and defines,

oversees and is accountable for the implementation of the governance arrangements.

The Board is responsible for ensuring that the Company complies at all times with its obligations

under the Law. In doing so, the Board approves and periodically reviews the effectiveness of the

policies, arrangements and procedures put in place, whilst if needed, takes appropriate measures

to address any deficiencies.

Moreover, the Board has the overall responsibility for the establishment and oversight of the

Company’s Risk Management Framework.

The Board satisfies itself that financial controls and systems of risk management are robust.

2.2. Committees

Establishing committees helps management bodies in their supervisory function. Committees

draw on the specific knowledge and areas of expertise of individual management body members.

While committees should prepare decisions and make recommendations to the management body

in its supervisory function, the management body has the overall responsibility.

According to Circular C487, if the Company meets the definition of ‘significant CIF’ as set out

in Section 26(8)(a) of the Law, it is obligated to establish a Risk, Remuneration and Nomination

Committee.

The Company does not fall under the definition of ‘significant CIF’ since its average on and off-

balance sheet items during the four preceding years were less than €100m.

Therefore, it is not required to comply with the additional regulatory requirements indicated

above. However, the Company has established a Risk Management Committee, Investment

Committee, Product Governance Committee and Remuneration Committee in order to ensure the

effectiveness of the risk management and investment policies and procedures.

Investment Committee

An Investment Committee has been formed to ensure the implementation of a prudent investment

policy and monitoring of the provision of adequate investment services to Clients. The

Investment Committee decisions shall relate to general and overall decisions as far as the

investments are concerned which correspond to the Client’s risk profile categories or the

Company’s risk profile, as applicable.

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These general and overall decisions relate to various sectors of the economy across multiple

regions and countries, general macroeconomic indicators, types of Financial Instruments, types

of financial markets and market segments.

Furthermore, these decisions are notified to the relevant Heads of the Departments of the

Company, as necessary, to enable discharging of their duties in an effective manner. As far as

investments are concerned and when related to specific investment strategies, these decisions are

of a prescribed content.

Risk Management Committee

The Risk Management Committee of the Company is formed with the view to ensure the efficient

monitoring of the risks inherent in the provision of the investment and ancillary services to

Clients, as well as the overall risks underlying the operations of the Company.

To this effect, the Company has adopted and maintains an applied risk management

framework/policy, which identifies the risks relating to the Company’s activities, processes and

systems and sets the risk tolerance levels of the Company.

The Risk Management Committee bears the responsibility to monitor the adequacy and

effectiveness of the said risk management framework/policy and procedures that are in place, the

level of compliance by the Company and its relevant persons with the policies and procedures

adopted, as well as the adequacy and effectiveness of measures taken to address any deficiencies

with respect to those policies and procedures that are in place, including failures by the

Company’s relevant persons to comply with those policies and procedures.

Furthermore, the risk committee advises the management body on the investment firm’s overall

current and future risk appetite and strategy and assists the management body in overseeing the

implementation of that strategy by senior management.

2.3. Policy on Recruitment

Recruitment into the Board combines an assessment of both technical capability and

competency skills referenced against the Company’s leadership framework. Members of the

Board possess sufficient knowledge, skills and experience to perform their duties. The overall

composition of the Board reflects an adequately broad range of experiences to be able to

understand the CIF’s activities, including the main risks to ensure the sound and prudent

management of the Company as well as sufficient knowledge, of the legal framework governing

the operations of a CIF.

2.4. Number of Directorships held by members of the Board

The table below discloses the number of directorships held by members of the management body

of the Company, including VPR Safe Financial Group Ltd and any other companies belonging

to the same group, as at 31 December 2023. Directorships in organisations which do not pursue

predominantly commercial objectives such as non-profit or charitable organisations, are not

taken into account for the purposes of the below.

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Table 5: Number of Directorships of the members of the Board of Directors

Director

Function

Number of

Executive

Directorships

Number of

Non-Executive

Directorships

Mr. Achilleas Pantazis

Executive Director

Mr. Agamemnon Ioannides

Executive Director

Mr. George Skordis

Non-Executive Director

Mr. Andreas Kolonas

Non-Executive Director

* The information in this table is based only on representations made by the directors of the Company.

For the purpose of the above, Executive or Non-Executive directorships held within the same

group shall count as a single directorship.

2.5. Policy on Diversity

The Group is committed to promote a diverse and inclusive workplace at all levels, reflective of

the communities in which it does business.

It approaches diversity in the broadest sense, recognizing that successful businesses flourish

through embracing diversity into their business strategy, and developing talent at every level in

the organisation.

For this purpose, the Group takes into consideration various aspects such as broad industry

experience, knowledge, independence, gender, age and cultural and educational background for

the Board appointments.

2.6. Information flow on risk to the management body

Risk information flows up to the Board directly from the business departments and control

functions. The Board ensures that it receives on a frequent basis, at least annually written reports

regarding Internal Audit, Compliance, Money Laundering and Terrorist Financing and Risk

Management issues and approves the Group’s ICARA report as shown in the table below:

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Table 6: Information flow on risk to management body

No.

Report Name

Owner of Report

Recipient

Frequency

Risk Manager’s

Report

Risk Manager

Senior Management,

Board, CySEC

Annually

IF CLASS2 Ind &

IF CLASS2 Con

Risk Manager

Senior Management,

Board, CySEC

Quarterly

ICARA Report

Risk Manager

Senior Management,

Board

Annually

Disclosures &

Market Discipline

Risk Manager

Senior Management,

Board

Annually

Risk Register

Risk Manager

Senior Management,

Board

Annually

Compliance Report

Compliance Officer

Senior Management,

Board, CySEC

Annually

Internal Audit

Report

Internal Auditor

Senior Management,

Board, CySEC

Annually

Anti-money

laundering

(AMLCO) Report

Anti-money

laundering

Compliance Officer

Senior Management,

Board, CySEC

Annually

Audited Financial

Statements

External Auditor

Senior Management,

Board, CySEC

Annually

Form165-03

‘Prudential

Supervision

Information’

Risk Manager

Senior Management,

Board, CySEC

Annually

Form 20-01

(Recovery Plan)*

Risk Manager

Senior Management,

Board, CySEC

Every Two

Years

Resolution

Templates (XBRL)

Risk Manager

Senior Management,

Board, Resolution

Authority (CBC)

Annually

Remuneration

Reporting

Finance

Department & Risk

Manager

Senior Management,

Board, CySEC

Annually

*CIF which are subject to simplified obligations for the purpose of preparing their recovery plans

according to Directive DI20-01

Furthermore, the Group believes that the risk governance processes and policies are of at most

importance for its effective and efficient operation. The processes are reviewed and updated on

an annual basis or when deemed necessary.

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3. OWN FUNDS

Own Funds (also referred to as capital resources) is the type and level of regulatory capital that

must be held to enable the Group to absorb losses.

During the year under review, the primary objective of the Group with respect to capital

management was to ensure that it complied with the imposed capital requirements with respect

to its own funds and that the Group maintained healthy capital ratios in order to support its

business.

Further to the above, the Company as a Class 2 investment firm shall at all times have own funds

at least the highest of the following:

• Initial Capital Requirement,

• Fixed Overheads Requirements, and

• K-Factors Requirement.

3.1. Regulatory Own funds

The Company shall disclose information relating to their own funds according to Article 49(a)

and (c) of IFR.

The following information provides a full reconciliation of the Common Equity Tier 1 (CET1)

and Additional Tier 1 (AT1) instruments and Tier 2 (T2) instruments issued by the Company.

The composition of the Group’s Own Funds which is cross-referenced to the corresponding rows

in table EU IF CC2 is shown below:

Table 7: IF CC1.01 - Composition of regulatory own funds as at 31 December 2023

Common Equity Tier 1 (CET1) capital:

instruments and reserves

Solo

€’000

Conso

€’000

Source based on

reference numbers of

the audited financial

statements

(EU IF CC2)

OWN FUNDS

3,436

3,416

TIER 1 CAPITAL

3,436

3,416

COMMON EQUITY TIER 1 CAPITAL

3,436

3,416

Fully paid up capital instruments

1 (Shareholders' Equity)

Share premium

308

2 (Shareholders' Equity)

Retained earnings

212

3,186

4 (Shareholders' Equity)

Accumulated other comprehensive income

N/A

Other reserves

3,000

315

3 & 5 (Shareholders'

Equity)

Minority interest given recognition in CET1

capital

N/A

Adjustments to CET1 due to prudential filters

N/A

Other funds

N/A

(-)TOTAL DEDUCTIONS FROM COMMON

EQUITY TIER 1

(1)

(-) Own CET1 instruments

N/A

(-) Direct holdings of CET1 instruments

N/A

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 17

(-) Indirect holdings of CET1 instruments

N/A

(-) Synthetic holdings of CET1 instruments

N/A

(-) Losses for the current financial year

N/A

(-) Goodwill

N/A

(-) Other intangible assets

(1)

3 (Assets)

(-) Deferred tax assets

N/A

(-) Qualifying holding outside the financial

sector which exceeds 15% of own funds

N/A

(-) Total qualifying holdings in undertaking

other than financial sector entities which exceeds

60% of its own funds

N/A

(-) CET1 instruments of financial sector

N/A

(-) CET1 instruments of financial sector

entities where the institution has a significant

investment

N/A

(-)Defined benefit pension fund assets

N/A

(-) Other deductions

N/A

CET1: Other capital elements, deductions and

adjustments

(85)

4 & 7 (Assets)

ADDITIONAL TIER 1 CAPITAL

N/A

Fully paid up, directly issued capital instruments

N/A

Share premium

N/A

(-) TOTAL DEDUCTIONS FROM

ADDITIONAL TIER 1

(-) Own AT1 instruments

N/A

(-) Direct holdings of AT1 instruments

N/A

(-) Indirect holdings of AT1 instruments

N/A

(-) Synthetic holdings of AT1 instruments

N/A

(-) AT1 instruments of financial sector entities

N/A

(-) AT1 instruments of financial sector entities

where the institution has a significant investment

N/A

(-) Other deductions

N/A

Additional Tier 1: Other capital elements,

deductions and adjustments

N/A

TIER 2 CAPITAL

N/A

Fully paid up, directly issued capital instruments

N/A

Share premium

N/A

(-) TOTAL DEDUCTIONS FROM TIER 2

(-) Own T2 instruments

N/A

(-) Direct holdings of T2 instruments

N/A

(-) Indirect holdings of T2 instruments

N/A

(-) Synthetic holdings of T2 instruments

N/A

(-) T2 instruments of financial sector entities

N/A

(-) T2 instruments of financial sector entities

where the institution has a significant investment

N/A

Tier 2: Other capital elements, deductions and

adjustments

N/A

According to the Circular C334, CIFs should deduct the additional Cash Buffer of 3 per

thousand of the eligible funds and financial instruments of their clients as at the previous year

calculated according to paragraph 11(6) of the Directive DI87-07 (operation of the ICF).

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 18

3.2. Main features of capital instruments

The Company shall disclose the main features of the CET1 and AT1 instruments and Tier 2

instruments issued according to Article 49(b) of IFR. Therefore, the Company’s capital

instruments’ main features are outlined below:

Table 8: EU IF CCA - Main features of own instruments issued by the firm

Item

CET1 Capital

Issuer

Versanto LTD

Unique identifier (e.g. CUSIP, ISIN or Bloomberg

identifier for private placement)

N/A

Public or private placement

Private

Governing law(s) of the instrument

Cyprus Companies Law

Instrument type (types to be specified by each

jurisdiction)

Ordinary Shares

Amount recognised in regulatory capital

€1,000

Nominal amount of instrument

€1,000

Issue price

€1

Redemption price

N/A

Accounting classification

Shareholder’s Equity

Original date of issuance

18/08/2020

Perpetual or dated

Perpetual

Original maturity date

No maturity

Issuer call subject to prior supervisory approval

N/A

Optional call date, contingent call dates and

redemption amount

N/A

Subsequent call dates, if applicable

N/A

Coupons / dividends

Fixed or floating dividend/coupon

Floating

Coupon rate and any related index

N/A

Existence of a dividend stopper

Fully discretionary, partially discretionary or

mandatory (in terms of timing)

N/A

Fully discretionary, partially discretionary or

mandatory (in terms of amount)

N/A

Existence of step up or other incentive to redeem

Noncumulative or cumulative

Non-cumulative

Convertible or non-convertible

Non-convertible

Write-down features

N/A

Non-compliant transitioned features

N/A

If yes, specify non-compliant features

N/A

Link to the full term and conditions of the instrument

N/A

3.3. Balance Sheet Reconciliation

The Company shall disclose the balance sheet included in their audited financial statements for

the year-end disclosures.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 19

As at the 31 December 2023, the reconciliation of Group’s assets and liabilities and regulatory

Own Funds is shown in the following table:

Table 9: Balance Sheet Reconciliation

No.

Item

Balance sheet as in

audited financial

statements

€’000

Under

regulatory scope

of consolidation

€’000

Cross

reference to

EU IF CC1

Assets - Breakdown by asset classes according to the balance sheet in the audited financial

statements

Property, plant and

equipment

N/A

Right-of-use assets

206

N/A

Intangible assets

Ref.19

Investors' Compensation

Fund

Ref.27

Trade and other

receivables

929

N/A

Refundable taxes

N/A

Cash at bank and in hand

3,723

Ref.27

Total Assets

5,001

Liabilities - Breakdown by liability classes according to the balance sheet in the audited

financial statements

Trade and other payables

1,250

N/A

Borrowings

N/A

Lease liabilities

208

N/A

Total Liabilities

1,499

Shareholders' Equity

Share capital

Ref.4

Share Premium

Ref.5

Other Reserves

Ref.8

Retained earnings

3,186

Ref.6

Non-controlling interests

Ref.8

Total Shareholders'

equity

3,502

Disclosures & Market Discipline Report 2023

VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 20

4. OWN FUNDS REQUIREMENTS

4.1. Own Funds Requirement

4.1.1. Initial Capital Requirement

As per the Title III of the Law, the initial capital of a CIF which is authorised to provide any of

the investment services or perform any of the investment activities listed in points (3) and (6) of

Part I of Annex I to the Investment Services and Activities and Regulated Markets Law, shall be

€750k while for a CIF which is authorised to provide any of the investment activities listed in

points (1), (2), (4), (5) and (7) and which is not permitted to hold client money or securities

belonging to its clients, the initial capital shall be €75k. For all other CIFs, the initial capital shall

be €150k.

Therefore, since the Company is authorised to provide the investment service of “dealing on own

account”, its initial capital is €750k.

4.1.2. Fixed Overheads requirement

The fixed overheads requirement (FOR) applies to all CIFs. The FOR is intended to calculate a

minimum amount of capital that a CIF would need available to absorb losses if it has cause to

wind-down or exit the market. It is calculated as the one quarter of the fixed overheads of the

preceding year (or business plan where the audited financial statements are not available) in

accordance with the provision of Article 13 of IFR.

Further to the above, the Group’s fixed overheads requirement based on the latest audited

financial statements for the year 2023 is €1,208k on a solo basis and €1,262k on a consolidated

basis as per the table below:

Table 10: Fixed Overheads Requirement

Item

Solo

€’000

Conso

€’000

Total expenses of the previous year after distribution of profits

29,660

29,876

Total deductions

(24,827)

(-)Staff bonuses and other remuneration

(-)Employees', directors' and partners' shares in net profits

(-)Other discretionary payments of profits and variable remuneration

(-)Shared commission and fees payable

(16,862)

(-)Fees, brokerage and other charges paid to CCPs

(-)Fees to tied agents

(-)Interest paid to customers on client money

(-)Non-recurring expenses from non-ordinary activities

(7,654)

7,654

(-)Expenditures from taxes

(311)

(-)Losses from trading on own account in financial instruments

(-)Contract based profit and loss transfer agreements

(-)Expenditure on raw materials

(-)Payments into a fund for general banking risk

(-)Expenses related to items already deducted from own funds

Annual Fixed Overheads

4,833

5,049

Fixed Overheads requirement

1,208

1,262

Disclosures & Market Discipline Report 2023

VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 21

4.1.3. K-Factors Requirement

The K-factor capital requirements are essentially a mixture of activity- and exposure-based

requirements. K-factors applies to an individual investment firm will depend on the MiFID

investment services and activities it undertakes.

Capital requirement from applying K-factors formula is the sum of Risk to Client (‘RtC’), Risk

to Market (‘RtM’) and Risk to Firm (‘RtF’).

Further to the above and since the Company is Class 2 IF which is authorized to provide the

investment service of Dealing on Own Account, all RtC, RtM and RtF proxies are applicable

for the Company.

Risk to Client

The risk to Client proxy captures the risk that may be inflicted onto the clients. RtC exists in the

activities/services of the firm which are related to the client and are measured as a percentage of

Clients Money Held (CMH), Assets Under Management (AUM), Assets Safeguarded &

Administered (ASA) and Clients’ Orders Handled (COH).

The Company is required to calculate the following K-Factors requirements as part of the RtC:

K-AUM: Assets Under Management

K‐AUM captures the risk of harm to clients from an incorrect discretionary management of client

portfolios or poor execution and provides reassurance and client benefits in terms of the

continuity of service of ongoing portfolio management and investment advice.

AUM is the value of assets an IF manages for its clients under both discretionary portfolio

management and non-discretionary arrangements constituting investment advice of an ongoing

nature.

Calculation

AUM shall be the rolling average of the value of the total monthly assets under management,

measured on the last business day of each of the previous 15 months, excluding the 3 most recent

monthly values.

K-AUM shall be the arithmetic mean of the remaining 12 monthly values multiplied by the

relevant coefficient of 0.02%.

Since the Company is not authorised to provide portfolio management or investment advice

services, the Company is not subject to the risk relating to this K-factor.

K-CMH: Client Money Held

K‐CMH captures the risk of potential for harm where an investment firm holds the money of its

clients, taking into account whether they are on its own balance sheet or in third‐party accounts

and arrangements under applicable national law. This provides that client money is safeguarded

in the event of bankruptcy, insolvency, or entry into resolution or administration of the

investment firm.

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CMH is the amount of client money that an investment firm holds or controls. It excludes client

money that is deposited on a (custodian) bank account in the name of the client itself, where the

investment firm has access to these client funds via a third-party mandate (on a segregated or

non-segregated basis).

Calculation

CMH shall be the rolling average of the value of total daily client money held, measured at the

end of each business day for the previous 9 months, excluding the 3 most recent months.

K-CMH shall be the arithmetic mean of the daily values from the remaining 6 months multiplied

by the relevant coefficient (0.4% for segregated accounts and 0.5% for non- segregated

accounts).

As at 31 December 2023, the K-CMH was €29k. The table below shows the average CMH values

in segregated accounts and non-segregated accounts for the 4th quarter of 2023 in accordance

with the Article 18(1) of IFR:

Table 11: Total CMH (average amounts)

Factor amount

December

2023

€’000

November

2023

€’000

October 2023

€’000

CMH - Segregated (average amounts)

7,296

7,644

8,248

CMH - Non-segregated (average amounts)

K-ASA: Assets Safeguarded and Administered

K‐ASA captures the risk of safeguarding and administering client assets, and ensures that

investment firms hold capital in proportion to such balances, regardless of whether they are on

its own balance sheet or in third‐party accounts.

ASA means the value of assets that an investment firm safeguards and administers for clients –

ensures that investment firms hold capital in proportion to such balances, regardless of whether

they are on its own balance sheet or in third-party accounts.

Calculation

It is calculated as the rolling average of the daily total value of assets under safekeeping and

administration, measured at the end of each business day for the previous 9 months, excluding

the 3 most recent months.

K-ASA shall be the arithmetic mean of the daily values from the remaining 6 months multiplied

by the relevant coefficient of 0.04%.

During the year under review, the Company was not subject to the risk relating to K-ASA since

it was safeguarding clients’ positions in CFD products. It is noted that the safeguarding of clients’

positions in CFD products is captured under K-CMH in consideration of the nature of CFD

products.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 23

K-COH: Client Orders Handled

K‐COH captures the potential risk to clients of an investment firm which executes orders (in the

name of the client, and not in the name of the investment firm itself), for example as part of

execution‐only services to clients or when an investment firm is part of a chain of client orders.

COH captures the potential risk to clients of an investment firm which executes its orders (in the

name of the client). This is the value of orders that an investment firm handles for clients, through

the reception and transmission of client orders and execution of orders on behalf of clients.

Calculation

COH shall be the rolling average of the value of the total client orders handled, measured

throughout each business day for the previous 6 months.

K-COH shall be the arithmetic mean of the daily values of the remaining 3 months multiplied by

the relevant coefficient (0.1% for cash trades and 0.01% for derivative trades).

The Company executes its clients’ orders by acting as principal to their trades, therefore the risk

reflected by this K-factor does not apply.

Risk to Market

The Risk to market proxy captures the risk an IF can pose to market access. The K-factor for

RtM is based on the rules for market risk, for position in financial instruments in foreign

exchange and in commodities in accordance with the CRR.

K-NPR: Net Position Risk

A Class 2 investment firm must calculate its K-NPR requirement by reference to trading book

positions and positions other than trading book positions where the positions give rise to

foreign exchange risk or commodity risk. The K-NPR requirement is calculated in accordance

with Title IV of Part Three of the CRR.

The Company is exposed to market risk resulting from exposure to:

▪ FX Risk;

▪ Commodity Risk

▪ Equity Risk

As at 31 December 2023, the K-NPR capital requirements amounted to €918k on both solo and

consolidated basis, as shown in the table below:

Table 12:K-NPR capital requirement

K-NPR

€'000

Foreign Exchange Risk

178

Commodities Risk

308

Position Risk

432

K-NPR

864

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 24

Foreign Exchange Risk

Foreign exchange risk is the effect that unanticipated exchange rate changes have on the

Company.

In the ordinary course of business, the Company is exposed to foreign exchange risk, which is

monitored through various control mechanisms.

The foreign exchange risk in the Company is effectively managed by setting and controlling

foreign exchange risk limits, such as through the establishment of a maximum value of exposure

to a particular currency pair as well as through the utilization of sensitivity analysis.

The Company’s foreign exchange risk capital requirement is €178k emanating from a net foreign

exchange exposure of €2,645k based on the latest relevant calculations of the Company’s capital

requirements, as at 31

of December 2023.

The Company continues to regularly monitor the impact of exchange rate risks and if deemed

necessary corrective actions will be taken to minimize the effect.

Closely Correlated Currencies

Following the EBA’s Final draft Implementing Technical Standards on Closely Correlated

Currencies under Article 354 (3) of CRR, the Company may apply lower own funds requirements

against positions in relevant closely correlated currencies as these are disclosed by EBA. In this

respect, for the calculation of the foreign exchange risk for matched positions on closely

correlated currencies, a capital requirement of 4% instead of 8% is used.

The Company’s matched positions in closely correlated currencies for the period up to 31

December 2023 were €851k. In this respect, please find below the analysis of the Company’s

exposure to Foreign Exchange Risk as at 31 December 2023:

Table 13: Foreign Exchange Risk capital requirements

Positions Subject to Capital

Capital

Requirement

€'000

Long

€'000

Short

€'000

Matched

€'000

Closely Correlated Currencies

946

851

Of which EUR

All Other Currencies

1,736

Gold Positions

Total

2,682

851

178

FX risk analysis is the same for both solo and consolidated basis.

Commodities Risk

Commodities Risk is the risk of the unexpected changes in commodities prices. These

commodities are split into precious metals (except gold), base metals, agricultural products and

other energy products (oil, gas).

The Company calculates its capital requirement with respect to commodities risk using the

Simplified Approach. Each position in commodities or commodity derivatives is expressed in

Disclosures & Market Discipline Report 2023

VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 25

terms of the standard unit of measurement. The spot price in each commodity is expressed in the

reporting currency. The capital requirements for each commodity are calculated as the

summation of the following:

• 15% x net position (long or short) x spot price for the commodity

• 3% x gross position (long plus short) x spot price for the commodity

As at 31 December 2023, the Commodities risk capital requirements due to commodities risk

amounted to €308k.

Table 14: Capital requirements for Commodities risk

Category

Gross Long

€000

Gross Short

€000

Net Long

€000

Net Short

€000

OFR

€000

Precious Metals

136

449

313

Agricultural

790

1,793

1,004

181

Other

4,711

4,840

797

927

Total

5,636

7,082

797

2,243

308

Commodities risk analysis is the same for both solo and consolidated basis.

Position Risk

Position Risk is the risk involved with a certain trading position, commonly incurred due to the

changes in price of the debt and equity instruments. The Company calculates its capital

requirements for position risk as the sum of the own funds requirements for the general and

specific risk of its positions in debt and equity instruments.

Equities

Equity Risk is the risk that the fair value of a financial instrument fluctuates as a result of changes

in market prices other than due to the effect of transactional foreign currency exposures or interest

rate risks.

The sum of the absolute values of all of the Company’s net long positions and all its net short

positions is its overall gross position. The Company calculates, separately for each market, the

difference between the sum of the net long and the net short positions. The sum of the absolute

values of those differences is its overall net position. The specific risk on this individual equity

can be ignored if the stock-index future in question is exchange traded and represents a relevant

appropriately diversified index.

The Company multiplies its overall gross position by 8% in order to calculate its own funds

requirement against specific risk. The own funds requirement against general risk are the

Company's overall net position multiplied by 8%.

As at 31 December 2023, the market risk capital requirements, due to position risk in equities

amounted to €432k.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 26

Table 15: Position risks in equities

Total Exposure

€000

Capital Requirements

€000

General Risk

4,512

361

Specific Risk

886

Total

5,397

432

Equity risk analysis is the same for both solo and consolidated basis.

Risk to Firm

The Risk to Firm captures the risk that could be inflicted on the Company. The K-factors under

RtF capture an investment firm’s exposure to their trading counterparties, the concentration risk

in an investment firm's large exposures and the operational risk from an investment firm’s daily

trading flow:

K‐factors for K‐TCD and K‐CON under RtF constitute a simplified application of the rules laid

down in the CRR on counterparty credit risk and large exposure risk, respectively.

The Company is required to calculate the following K-Factors requirements as part of the RtF:

K-TCD: Trading Counterparty Default

K-TCD captures the risk to an investment firm by counterparties to over‐the‐counter (OTC)

derivatives, repurchase transactions, securities and commodities lending or borrowing

transactions, long settlement transactions, margin lending transactions, or any other securities

financing transactions, as well as by recipients of loans granted by the investment firm on an

ancillary basis as part of an investment service that fails to fulfil their obligations, by multiplying

the value of the exposures, based on replacement cost and an add‐on for potential future exposure,

accounting for the mitigating effects of effective netting and the exchange of collateral.

Calculation

Calculation based on CRR counterparty credit risk refers to exposure value, credit valuation,

replacement cost, potential future exposure and collateral. The following formulas describe the

calculation of the capital requirement for K-TCD:

K-TCD=a x EV x Rf x CVA

Where:

- a=1.2

- EV = Exposure value calculated in accordance Article 27 of IFR

- RF = the risk factor applicable to the counterparty type as set out in the table 2 in Article 26

- CVA = the credit valuation adjustment calculated in accordance with Article 32of IFR.

Trading Counterparty Default arises primarily as a result of the Company’s open CFD positions

maintained with clients . For the open positions with clients, the Company sets principles to

monitor and manage this risk on a real-time basis.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 27

The K-TCD as at 31 December 2023 was calculated based on the provisions of Articles 25 to 32

of the IFR, as shown below:

Table 16: K-TCD Exposures

K - TCD

Exposure

value

Replacement

cost

(RC)

Potential

future

exposure

(PFE)

Collateral

(C)

Breakdown by method for determining the exposure value

Application of IFR: K-TCD

373

3,890

4,284

2,508

696,100

Breakdown by type of counterparty

Central governments,

central banks and public

sector entities

Credit institutions and

investment firms

Other counterparties

373

K-CON: Concentration Risk on Large Exposures

K-CON captures concentration risk in relation to individual or highly connected private sector

counterparties with whom firms have exposures above 25 % of their own funds, or specific

alternative thresholds in relation to credit institutions or other investment firms, by imposing a

capital add‐on in line with CRR for excess exposures above those limits.

All IFs should monitor and control their concentration risk. However only Investment Firms

which are subject to a minimum own funds requirement under the K-Factors should report the

concentration risk.

Limits

Where the client is a credit institution or an investment firm, the limit to concentration will be

the higher of 25% of the investment firm's capital or €150m. If the amount of €150m is higher

than 25% of the firm's own funds, the limit to concentration should not exceed 100% of the firm’s

capital.

Where the client is not credit institution or investment firm, the limit to concentration risk remains

at 25% of the investment firm’s own funds.

Calculation

Where a firm exceeds these limits, it will be required to hold additional own fund requirement

based on the excess over the limit multiplied by a factor between 200% and 900%, depending on

the size of the excess as per Table 6 of Article 39 of IFR.

Further to the above, Own Funds requirement of the excess shall be calculated in accordance

with the following formula:

𝑂𝐹𝑅𝐸 =

𝑂𝐹𝑅

𝐸𝑉

∗ 𝐸𝑉𝐸

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 28

Where:

• OFRE = own funds requirement for the excess;

• OFR = own funds requirement of exposures to an individual client or groups of connected

clients, calculated by adding together the own funds requirements of the exposures to the

individual clients within the group, which shall be treated as a single exposure;

• EV = exposure value calculated in TCD and NPR K-factors;

• EVE = exposure value excess calculated as Exposure Value minus Limit

The K-CON own funds requirement shall be the aggregate amount of the own funds requirement

calculated for each client or group of connected clients.

The Company calculates and keeps aside an additional capital requirement for any amount that

exceeds the applicable K-CON limit. Additionally, the Company reports to CySEC, on a

quarterly basis, via the Form 165-01, the amount of exposures exceeding the limits set in Article

37 of the IFR and the name of the relevant counterparty.

As at 31 December 2023, the Company’s exposures were within the limit and as such the K-

CON was zero.

K-DTF: Daily Trading Flow

K‐DTF captures the operational risks to an investment firm in large volumes of trades concluded

for its own account or for clients in its own name in one day which could result from inadequate

or failed internal processes, people and systems or from external events, based on the notional

value of daily trades, adjusted for the time to maturity of interest rate derivatives in order to limit

increases in own funds requirements, in particular for short‐term contracts where perceived

operational risks are lower.

DTF means the daily value of transactions that an investment firm enters through dealing on

own account or the execution of orders on behalf of clients in its own name, excluding the

value of orders that an investment firm handles for clients which are already taken into account

in the scope of client orders handled.

Calculation

DTF shall be the rolling average of the value of the total daily trading flow, measured throughout

each business day for the previous 9 months, excluding the 3 most recent months. K-DTF shall

be the arithmetic mean of the daily values of the remaining 6 months multiplied by the relevant

coefficient (0.1% for cash trades and 0.01% for derivative trades).

As at 31 December 2023, the K-DTF was €7k. The table below shows the arithmetic mean

amount of DTF in cash trades and derivatives for the 4

quarter of 2023, in accordance with the

Article 20(1) of IFR:

Table 17: Total DTF (average amounts)

Factor amount

December

2023

€’000

November

2023

€’000

October

2023

€’000

DTF - Cash trades (average amounts)

DTF - Derivative (average amounts)

74,646

79,710

90,995

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 29

K-Factors Requirement Results

As at 31 December 202r3, the Company’s K-Factors Requirement is €k as shown in the table

below:

Table 18: K-Factors Results

Item

Solo

Consolidated

Factor

Amount

€’000

K-Factor

Requirement

€’000

Factor

Amount

€’000

K-Factor

Requirement

€’000

TOTAL K-FACTOR

REQUIREMENT

1,328

Risk To clients

K-AUM

K-CMH (Segregated)

7,296

K-CMH (non-Segregated)

K-ASA

K-COH (Cash Trades)

K-COH (Derivative Trades)

Risk to Market

918

K-NPR

918

K-CMG

Risk to Firm

381

K-TCD

373

K-DTF (Cash Trades)

K-DTF (Derivative Trades)

74,646

K-CON

The below figure illustrates the breakdown of the K-Factors requirement.

4.2. Capital Ratios

According to the Article 9 of the IFR, Investment firms shall have own funds consisting of the

sum of their Common Equity Tier 1 capital, Additional Tier 1 capital and Tier 2 capital, and shall

meet all the following conditions at all times:

𝑪𝒐𝒎𝒎𝒐𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 𝑻𝒊𝒆𝒓 𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

𝑫

≥ 𝟓𝟔%

𝑪𝒐𝒎𝒎𝒐𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 𝑻𝒊𝒆𝒓 𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 + 𝑨𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝑻𝒊𝒆𝒓 𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

𝑫

≥ 𝟕𝟓%

𝑪𝒐𝒎𝒎𝒐𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 𝑻𝒊𝒆𝒓 𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 + 𝑨𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝑻𝒊𝒆𝒓 𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 + 𝑻𝒊𝒆𝒓 𝟐 𝑪𝒂𝒑𝒊𝒕𝒂𝒍

𝑫

≥ 𝟏𝟎𝟎%

where D is the Company’s own funds requirement calculated in accordance with Article 11.

The Group’s own funds, own funds requirement and capital ratio reported as at 31 December

2023, were the following:

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 30

Table 19: Own Funds

OWN FUNDS COMPOSITION

Solo

€’000

Consolidated

€’000

Own Funds

3,436

3,186

OWN FUNDS REQUIREMENTS

€’000

Initial Capital

750

Fixed Overheads Requirement

1,208

1,262

K-Factors Requirement

1,328

Own funds Requirement

1,328

CAPITAL RATIOS

€’000

CET 1 (min. 56%)

258.82%

257.32%

Surplus(+)/Deficit(-) of CET 1 Capital

2,693

2,673

T1 (min. 75%)

258.82%

257.32%

Surplus(+)/Deficit(-) of Tier 1 Capital

2,441

2,421

Total (min. 100%)

258.82%

257.32%

Surplus/(Deficit) of total capital

2,109

2,089

As per the above results, the Company as at 31 December 2023 maintains adequate own funds

to cover its capital requirements. However, the Company should monitor the above ratios in order

to ensure compliance with the capital adequacy requirements at all times.

4.3.Liquidity Requirement

As a Class 2 investment firm, the Group is required to hold an amount of liquid assets equivalent

to at least one third of the fixed overheads requirement. The purpose is to ensure that the

investment firms have an adequate stock of unencumbered high-quality liquid assets that can be

converted easily and immediately in private markets in cash to meet their liquidity needs for a

30-calendar day liquidity stress scenario. The IFR specifies the instruments that are eligible to be

qualified as liquid assets to be included in the calculation of the said ratio:

• Coins and banknotes

• Claims on ECB or other Central Banks

• High Quality Covered Bonds

• Shares or units in CIUs

In this respect and as per the Group’s latest audited financial statements, the Group has the

following liquid assets which are well above 1/3 of the total fixed overheads requirement.

Table 20: Liquidity Requirements

Item

Solo

€’000

Consolidated

€’000

Liquidity Requirement

403

421

Liquid Assets

2,006

Surplus/(Deficit) of total liquid assets

1,603

1,585

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 31

Further to the above, the Group maintains adequate liquid assets to cover the one third fixed

overheads requirement. However, the Group should monitor the above in order to ensure

compliance at all times.

4.4. Reporting requirements

4.4.1. Quarterly Submissions

The Company as a Class 2 investment firm is required by the Law to report on a quarterly basis

the following items:

a) Level and composition of own funds

b) Own funds requirements

c) Own funds requirement calculations

d) Where the firm is a Class 3 firm – the level of activity, including the balance sheet

e) and revenue breakdown by investment service and applicable K-factor

f) Concentration risk

g) Liquidity requirements

The information above shall be reported to CySEC using the prudential forms IF CLASS2 Ind

and forms IF CLASS2 Con on a quarterly basis though CySEC’s XBRL portal.

The Senior Management as well as the Risk Manager monitored such reporting and have

policies Moreover, the Company is required to submit immediately to CySEC the prudential

Form under exceptional reporting, when

i. the own funds of the CIF have decreased below its own funds requirement,

ii. the CIF’s liquid assets are below its liquidity requirement, and

iii. the CIF has exceeded the concentration risk limits, as defined in Articles 37(1) and

37(3) of IFR.

During the year under review, the Group’s own funds never dropped below its own funds

requirement and the Group fulfilled its obligations by successfully submitting, on a quarterly

basis, the Capital Adequacy Reports.

4.4.2. Concentration risk requirements

The concentration risk arising from exposures to each counterparty, including central

counterparties, groups of connected counterparties, and counterparties in the same economic

sector, geographic region or from the same activity or commodity, the application of credit risk

mitigation techniques, and including in particular risks associated with large indirect credit

exposures such as a single collateral issuer, must be addressed and controlled including by means

of written policies and procedures.

Exposure means any asset or off-balance sheet item without applying the risk weights or degrees

of risk. Large Exposure means the exposures in the trading book/banking book of an investment

firm to a client or a group of connected clients, the value of which exceeds the limits set.

The CIFs that are categorized as Class 2 IFs should continue to monitor and control their

concentration risk with regards to their trading book exposures to a client or a group of connected

clients in accordance with Part four of IFR.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 32

In particular, CIFs shall monitor and control their concentration risk so as not to exceed the

following limits as per Article 37 of IFR.

Table 21: Large Exposure Limits

Type

Limit

Institution

Min {up to 100% of eligible capital,

Max (25% of eligible capital, €150m)}

Non-institution

25% of eligible capital

Where any trading book exposure exceeds the limits mentioned above, a CIF shall calculate an

additional capital requirement as part of the K-CON requirement.

According to Circular C513, the Company should notify CySEC without delay when the limits

referred to in article 37(3) of IFR are exceeded, as required by article 38 of IFR.

Moreover, harm can arise from more than just a concentrated trading book exposure to a client.

To mitigate the potential for harm that can arise from different types of concentrated exposures

or relationships, the Group should monitor and control all their sources of concentration risk,

including:

• exposures in a trading book

• assets (for example, trade debts) not recorded in a trading book

• off-balance sheet items

• the location of client money

• the location of client assets

• the location of its own cash deposits

• the sources of its earnings

However, there are no limits on the banking book exposures of an Investment Firm.

The Group is reporting to CySEC on a quarterly basis the level of concentration risk with respect

to the credit institutions, investment firms and other entities where clients’ money are held and

where client securities are deposited while it shall report the level of concentration risk with

respect to the credit institutions where its own cash is deposited as per Article 54(2) of IFR.

Moreover, the Group shall report the top five clients from whom the largest amounts of

Company’s earnings are derived, the top five, if available, largest trading book exposures and

largest exposures not recorded in the trading book.

the Group maintains proper accounting controls in order to identify, monitor and control all

exposures including clients’ balances and the value of the assets held as financial instruments

under pledge.

4.5.Other Material Risks

Operational Risk

Operational risk means the risk of loss resulting from inadequate or failed internal processes,

people and systems or from external events. Operational risk includes legal risk but excludes

strategic and reputational risk.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 33

The following list presents some event-type categories, included in operational risk, with some

examples for each category:

The Group manages operational risk through a control-based environment in which processes

are documented and transactions are reconciled and monitored. This is supported by continuous

monitoring of operational risk incidents to ensure that past failures are not repeated.

Furthermore, the Group has in place policies and processes whose implementation assists with

the evaluation and management of any exposures to operational risk.

The Group has implemented an operational risk management framework designed to ensure that

operational risks are assessed, mitigated and reported in a consistent manner consisting of, inter

alia, the following components:

• misappropriation of assets;

• tax evasion;

• intentional mismarking of positions;

• bribery.

Internal Fraud

• theft of information;

• hacking damage;

• third-party theft;

• forgery.

External Fraud

• discrimination;

• workers compensation;

• employee health;

• safety.

Employment Practices and

Workplace Safety

• market manipulation;

• antitrust;

• improper trade.

Clients, Products, &

Business Practice

• damage to physical assets from a natural disaster,

e.g. earthquake

Damage to physical assets

• utility disruptions;

• software failures;

• hardware failures.

Business Disruption &

Systems Failures

• data entry errors;

• accounting errors;

• failed mandatory reporting;

• negligent loss of Client assets.

Execution, Delivery, &

Process Management

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 34

• Maintaining a four-eye structure and implementing board oversight over the strategic

decisions made by the heads of departments;

• An IT Disaster Recovery Plan has been designed in order to be used in the event of a

force majeure affecting the Group’s internal systems and databases; and

• Maintenance of Risk Registers in the Context of the ICARA;

• A Business Continuity Plan has been implemented which helps protect all of the

Group’s information databases including data, records and facilities.

• The majority of actions occurring in the Group’s systems are automated and therefore it

is less likely that a human error will occur;

• Review of risks and controls as part of the Internal Audit function;

• Regular review and updating of the Group’s policies;

Reputation Risk

Reputational risk is the current or prospective risk to earnings and capital arising from an adverse

perception of the image of the Group by Clients, counterparties, shareholders, investors or

regulators. Reputational risk could be triggered by poor performance, the loss of one or more of

the Group’s key directors, the loss of large Clients, poor Client service, fraud or theft, Client

claims, legal action, regulatory fines and from negative publicity relating to the Group’s

operations whether such a fact is true or false.

The Group is aware that, operating in a demanding industry, with many competitors, who may

also act in unethical ways, could introduce risks of a reputational nature. The possibility of having

to deal with serious incidents is limited as the Group exerts its best efforts in providing high

quality services to its clients. In addition, the Group’s Board members and Senior Management

comprise of experienced professionals who are recognized in the industry for their integrity and

ethos, and, as such, add value to the Group.

The Group aims to minimise reputational risk through the implementation of a strong internal

control system and adequate policies and procedures (including in the area of client complaint

handling). Furthermore, the Group aims to also mitigate this risk by ensuring that all employees

are adequately trained and equipped with the required skills to fulfil their duties.

Business Risk

Business Risk arises due to probable losses that might be incurred by the Group during

unfavourable market conditions, thus, having a current and/or future possible impact on earnings

or capital from adverse business decisions and/or the lack of responses to industry changes by

the Group.

Furthermore, business risk may arise from the probability of inadequate profits or losses due to

the unavailability of Liquidity Providers to execute transactions.

The Group may be exposed to business risk in case of a deterioration of business and economic

conditions in the markets in which it operates. The Group’s business plans involve an expansion

of its clientele so as to grow its revenue base and increase its profitability. However, the Group

has taken into consideration Business Risk when preparing its financial projections and when

conducting its stress testing procedures.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 35

In order to avoid any potential damage to the Group’s financial position, the Group continuously

evaluates (and redesigns if and when necessary) its business plans taking into account changing

economic conditions.

The Group has policies and procedures in place when dealing with possible Client complaints in

order to provide the best possible assistance and service under such circumstances.

Regulatory Risk

Regulatory risk is the risk the Group faces by not complying with relevant Laws and Directives

issued by its supervisory body. If materialized, regulatory risk could trigger the effects of

reputation and strategic risk. The Group has documented procedures and policies based on the

requirements of relevant Laws and Directives issued by the Commission; these can be found in

the Procedures Manual. Compliance with these procedures and policies are further assessed and

reviewed by the Internal Auditors and suggestions for improvement are implemented by

management. The Internal Auditors evaluate and test the effectiveness of the Group’s control

framework at least annually. Therefore, the risk of non-compliance is very low.

Legal and Compliance Risk

Legal & Compliance risks arise from violations of, or non-conformance with, the Law, Directives

and Circulars issued thereof, regulations, prescribed practices, internal policies, and procedures,

or ethical standards. This risk exposes the Group mainly to financial losses due to imposed fines

from the Regulators. Compliance incidents may also lead to diminished reputation, reduced

Group value, limited business opportunities, reduced expansion potential, and possible inability

to enforce contracts.

The probability of such risks occurring is relatively low due to the detailed internal procedures

and policies implemented by the Group and regular reviews by the Internal Auditors. The

structure of the Group is such to promote clear coordination of duties and the management

consists of individuals of suitable professional experience, ethos and integrity, who have

accepted responsibility for setting and achieving the Group’s strategic targets and goals. In

addition, the Board meets at least annually to discuss such issues and any suggestions to enhance

compliance are implemented by management.

Information Technology Risk

Information Technology (hereinafter, “IT”) risk could occur as a result of inadequate information

technology and processing, or arise from an inadequate IT strategy and policy or inadequate use

of the Group’s IT.

The Internal Auditor, as part of the annual on-site inspections, evaluates and assesses whether

the Group’s systems and infrastructure are adequate.

The aim of the Group is for the materialisation of IT risk to be minimised to the lowest possible

level and, as such, the Group shall take the respective rectifying measures, as and when deemed

necessary.

Specifically, policies have been implemented and measures have been taken regarding backup

procedures, software maintenance, hardware maintenance, internet use, data protection

procedures, and disaster recovery, as applicable.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 36

Conduct Risk

Conduct risk is defined as the risk of an action, by an individual, financial institution or the

industry as a whole, which leads to customer detriment or undermines market integrity. This can

bring sanctions and negative publicity to the Group. Moreover, EBA has defined conduct risk as

the current or prospective risk of losses to an institution arising from inappropriate supply of

financial services including cases of wilful or negligent misconduct. Consequently, conduct risk

arises from failures of designated liquidity providers located in third countries associated with

the Group. Furthermore, the Group can be exposed to conduct risks arising from inadequate

agreements with the third parties that hold clients’ funds.

The Group will continue to monitor the financial soundness of the liquidity providers and make

sure that it can justify the trading risks it undertakes, ensuring that it is in such a cash flow position

that it can undertake the settlement of all trades introduced or executed or hedged by its clients.

Moreover, the Group recognises the importance to ensure its clients’ protection, thus, the Group

has in place arrangements such as stop out limits and maintains adequate agreements with its

Liquidity Providers.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 37

5. INTERNAL CAPITAL ADEQUACY AND RISK ASSESSMENT PROCESS

The purpose of capital is to provide sufficient resources to absorb unexpected losses over and

above the ones that are expected in the normal course of business. The Company aims to maintain

a minimum risk asset ratio which will ensure there is sufficient capital to support the Company

during stressed conditions.

Pursuant to Chapter 2 and Paragraph 18 of the Law, the Company should establish sound,

effective and comprehensive arrangements, strategies and processes to assess and maintain on an

ongoing basis the amounts, types and distribution of internal capital and liquid assets that they

consider adequate to cover the nature and level of risks which they may pose to others and to

which the investment firms themselves are or might be exposed. These arrangements, strategies

and processes shall be appropriate and proportionate to the nature, scale and complexity of the

activities of the Company and they shall be subject to regular internal review.

In light of the above, the ICARA report presents the main business background and

developments of the Company, a summary of the Company’s business economic environment,

the Company’s financial summary for the previous and upcoming years, the business and

strategic goals, organisational structure and the risk management framework, the overall

assessment of its material risks as well as provides forward looking capital and liquidity

planning.

The Company recognises the importance of the ICARA and appreciates that it enables the firm

to justify its business strategy and risk assessments in such a way as to be more diligent in the

inclusion of risk factors in the business design process and also to hold adequate capital against

the gross risks to which it is exposed to. It is also acknowledged that the ICARA Report is a

reasonably intense process, requiring information from many different departments and

committees of the Company and also it requires senior management time and involvement at the

design phase, during the risk and financial data collection phase and the sign-off phase.

Therefore, the Board is committed to continuously update the ICARA at least annually to reflect

the latest strategic plans and updates.

The ICARA Report and capital planning for the year 2022 has been prepared and approved by

the Board in the third quarter of 2023. The report is being reviewed and updated annually, while

it is submitted to CySEC upon its request as laid down at Article 50(b) of the IFR.

Disclosures & Market Discipline Report 2023

VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 38

6. REMUNERATION POLICY

The Group has established a remuneration policy to set out the remuneration practices of the

Group taking into consideration the salaries and benefits of the staff, in accordance with the

provisions of Directive as well as the Circular 031 (Circular 031 has been issued in place of

Guidelines GD-IF-07 for the correct filing purposes) on remuneration policies and practices,

where these comply with specific principles in a way and to the extent that is appropriate to the

Group’s size, internal organization and the nature, scope and complexity of its activities.

Furthermore, the Group’s remuneration strategy is designed to reward and motivate the people

who are committed to maintaining a long term career within the Group and performing their role

in the interests of the Group.

The design of the Policy is approved by the people who effectively direct the business of the

Group, after taking advice from the compliance function, and implemented by appropriate

functions to promote effective corporate governance. The people who effectively direct the

business are responsible for the implementation of remuneration policies and practices and for

preventing and dealing with any relevant risks, that remuneration policies and practices can

create. The Board discusses remuneration policy matters at least annually. Furthermore, the

Policy also benefits from the full support of senior management or, where appropriate, the

supervisory function, so that necessary steps can be taken to ensure that relevant persons

effectively comply with the conflicts of interest and conduct of business policies and procedures.

The Policy adopts and maintains measures enabling them to effectively identify where the

relevant person fails to act in the best interest of the client and to take remedial action.

Finally, the Policy aims to (i) provide for sufficient incentives so as the relevant persons, -to

achieve the business targets, (ii) deliver an appropriate link between reward and performance

whilst at the same time consisting of a comprehensive, consistent and effective risk management

tool that prevents excessive risk taking and /or misselling practices in light of financial incentives

schemes, which could lead to compliance risks for the Group in the long-run.

Remuneration Committee

It is noted that the Company has considered its size, internal organisation and the nature, scope

and complexity of its activities and it does not deem as necessary the establishment of a specific

remuneration committee. Remuneration practices are currently set by the Senior Management, in

its supervisory capacity. In case the Company shall deem necessary to establish a Remuneration

Committee in the future, then this section shall be updated as applicable.

Remuneration System

The Group 's remuneration system and policy is concerned with practices of the Group for those

categories of staff whose professional activities have a material impact on its risk profile, i.e. the

Senior Management and members of the Board; the said practices are established to ensure that

the rewards for the “executive management” are linked to the Group’s performance, to provide

an incentive to achieve the key business aims and deliver an appropriate link between reward and

performance whilst ensuring base salary levels are not set at artificially low levels. the Group

uses remuneration as a significant method of attracting and retaining key employees whose talent

can contribute to the Group’s short and long term success.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 39

The remuneration mechanisms employed are well known management and human resources

tools in order to determine the remuneration of each staff member.

The Group’s remuneration system takes into account the highly competitive sector in which the

Group operates, and the considerable amount of resources the Group invests in each member of

the staff. The remuneration includes all forms of benefits provided by the Group to its staff and

can be Financial or non-Financial remuneration.

The employees’ total remuneration consists of a fixed component and a variable component. All

employees of the Company, under certain conditions, are eligible for annual bonus remuneration.

Fixed Remuneration

The Fixed Remuneration varies for different positions/roles depending on each position’s actual

functional requirements, and it is set at levels which reflect the educational level, experience,

accountability, and responsibility needed for a staff member to perform each position/role. The

remuneration is also set in comparison with standard market practices employed by the other

market participants/ competitors.

This fixed amount of remuneration includes salary, fixed pay allowance and other cash

allowances and they are all determined based on the role and position of each employee, taking

into account the experience, seniority, education, responsibility, and market conditions. Benefits

provided to the relevant Company employees, such as social insurance contributions, are not

employee performance-related and are considered part of the fixed remuneration.

The Company’s fixed remuneration is approved by the Board of Directors for all the relevant

employees and it is reviewed by the Company at such intervals, as it shall decide at its sole

discretion, without affecting the other terms of employment.

Variable Remuneration

The variable remuneration is a performance-based remuneration which motivates and rewards

staff members based on their results in relation with the targets set in the beginning of the year..

The Company has in place a ‘variable remuneration scheme’ whereby the employees of the Sales

Department may receive variable remuneration in addition to their monthly fixed salary. The

variable component of the remuneration shall not exceed 100% of the fixed component of the

total remuneration for each employee. In addition, the shareholders of the CIF may approve a

higher maximum level of the ratio between the fixed and variable components of Remuneration

provided that the overall level of the variable component does not exceed 200% of the fixed

component of the total Remuneration for each individual.

The Company does not award, pay or provide guaranteed variable remuneration and the variable

remuneration shall be assessed based on quantitative and qualitative criteria.

Annual Bonus Remuneration

All Company employees, except the members of the Board of Directors, may be eligible for the

annual (one-off) bonus remuneration.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 40

Other Factors

Other factors taken into account for the remuneration of the Group’s employees are the following:

a. The financial viability of the Group,

b. The general financial situation and the state in which the Group operates,

c. Each employee’s personal objectives (such as personal development, compliance with the

Group’s systems and controls, compliance with regulatory requirements, commitment

and work ethics) performance evaluation and the rating received based on their annual

performance in relation to the objectives set up at the beginning of the period,

d. Each employee’s professional conduct with Clients (such as acting in the best interest of

the Client, fair treatment of Clients and inducing Client satisfaction), as applicable.

Control Functions

The Company must ensure that employees engaged in Control Functions:

▪ Are independent from the business units they oversee;

▪ Have appropriate authority; and

▪ Are remunerated:

▪ Adequately to attract qualified and experienced staff; and

▪ In accordance with the achievement of the objectives linked to their functions,

independent of the performance of the business areas they control.

Further to the above, the Policy is designed to manage the conflicts of interest which might if

other business areas had undue influence over the remuneration of employees within Control

Functions. Moreover, the need to avoid undue influence is particularly important where

employees from the Control Functions are embedded in other business areas.

Performance Appraisal

The Group recognises the responsibility that the Staff has in driving its future success and

delivering value for the Group and that remuneration is a key component in motivating and

compensating its employees. Furthermore, the overall remuneration policy incorporates an

annual variable incentive compensation reflecting individual performance and overall

performance.

The individual performance is assessed during the annual appraisal process, which establishes

objectives for all staff covering both financial and non-financial factors, specific behavioral

competencies including compliance and risk management behaviors with regards to the Group’s

procedures.

The Group shall ensure that where remuneration is linked with performance, the total amount of

remuneration is based on a combination of the performance assessment of:

a. the individual (quantitative as well as qualitative criteria except those who perform their

duties on Control Functions where only qualitative criteria apply, are taken into account;

annual performance evaluation and performance rating are taken into account),

b. the business unit concerned, and

c. the overall results of the Group and as long as conflicts of interest are mitigated, as

described in this Policy.

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 41

Further to the above, the Group implements a performance appraisal method, which is based on

a set of Key Performance Indicators, developed for each business unit and its target is to promote

the healthy competition amongst personnel, analysis of weak and strong sides of each employee

performance-based and give feedback to the staff member in order to motive them to improve.

Most of the times, the performance appraisal takes place in a multiyear framework in order to

ensure that the appraisal process assesses employee’s long-term performance. However,

sometimes the performance appraisal is performed on a medium and short-term basis, and the

performance indicators of this type of performance appraisal includes quantitative as well as

qualitative criteria.

Remuneration of Senior Management Personnel and Directors

The remuneration policy of the Company is intended to ensure that the Company will attract and

retain the most qualified Senior Management Personnel and Directors. As stated above, the

criteria used for determining the remuneration of the Company’s directors are segregated into

quantitative and qualitative criteria. The quantitative remuneration criteria mostly rely on

numeric and financial data such as the Company’s performance and the individual performance

evaluation and ratings of each member of staff whose professional activities affect the risk profile

of the firm. In addition to the quantitative criteria, the Company has put in place qualitative

criteria which include compliance with regulatory requirements and internal procedures, fair

treatment of clients and client satisfaction.

Moreover, the remuneration of the Company’s non-executive directors is fixed, and it is set at a

level that is market aligned and reflects the qualification and competencies required based on the

Company’s size and complexity, the responsibilities and the time that the non-executive directors

are expected to consume in order to serve the Company.

The table below provides information on the remuneration of Executive Directors, Senior

Management and other staff whose activities have a material impact on the risk profile of the

Company, broken down by fixed and variable remuneration.

Table 22: Remuneration split of staff whose activities have a material impact on the risk

profile of the Company.

Annual Remuneration as at 31 December 2023

Position

No. of

Beneficiaries

Fixed

Remuneration

€

Variable

Remuneration

€

Aggregated

Remuneration

€

Executive

Directors

102,818

Senior

Management

(excl. directors)

369,163

15,928

385,091

Non-Executive

Directors

6,000

Total

477,981

15,928

493,909

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VPR Safe Financial Group Ltd– Regulated by the CySEC – CIF Licence No. 236/14 42

The Article 32 of the IFD sets, among others, the conditions on variable remuneration paid to

employees:

• at least 50% of the variable remuneration shall consist of shares/ share-linked instruments/

equivalent non-cash instruments that adequately reflect the credit quality of the IF as a

going concern, or non-cash instruments which reflect the instruments of the portfolios

managed;

• at least 40% of the variable remuneration is deferred over the three-to-five-year period.

Following the Article 32(4)(a) of the IFD, these points don’t apply to the Company since the

Company does not fall under the definition of ‘significant CIF’ (off-balance sheet assets is on

average less than €100m over the preceding four-year period).

Moreover, according to Article 34(4) of IFD, Investment Firms are required to disclose the

number of natural persons that are remunerated €1mln or more per financial year, in pay

brackets of €1mln, including their job responsibilities, the business area involved and the main

elements of salary, bonus, long-term award and pension contribution. Nevertheless, currently

there are no natural persons at the Company that are remunerated €1mln or more per financial

year and as such the above disclosure is not applicable to the Company.

During the year there were no deferred remuneration, sign-on or severance payments.

The aggregate remuneration of the Company’s personnel for the year ended 31st December 2023,

broken down by business area, is presented in the following table:

Table 23: Remuneration split by business area

Annual Remuneration as at 31 December 2023

Business Area

Fixed

€

Variable

€

Total

€

Control functions

313,757

Brokerage Department

58,909

2,024

60,933

Administration/Back Office

Department

194,008

Safekeeping Department

58,254

IT Services Department

26,222

Dealing Department

79,402

Total

730,552

2,024

732,576

*Control functions include the Executive Directors, Risk Manager and Money Laundering

Compliance Officer

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7. INVESTMENT POLICY

Investment Firms should disclose the following information in accordance with Article 46 of

IFR:

a) the proportion of voting rights attached to the shares held directly or indirectly by the

investment firm, broken down by Member State and sector;

b) a complete description of voting behaviour in the general meetings of companies the

shares of which are held in accordance with paragraph 2 of Article 46, an explanation of

the votes, and the ratio of proposals put forward by the administrative or management

body of the Group which the investment firm has approved; and

c) an explanation of the use of proxy advisor firms;

d) the voting guidelines regarding the companies the shares of which are held in accordance

with paragraph 2 of Article 46.

Investment Firms which meet the criteria of Paragraph 26(8)(a) of the Law, whose on-and-off

balance sheet assets on average over the 4 year period are less than €100m are exempted from

the disclosure requirement regarding investment policy.

The Group’s average on and off-balance sheet assets for the preceding four-year period are less

than €100m and as such it meets the criteria of the paragraph 26(8) of the Law. Therefore, the

Group is exempted from the disclosures requirement regarding investment policy.

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8. ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISKS

From 26 December 2022, investment firms which do not meet the criteria referred to Paragraph

26(8)(a) of the Law shall disclose information on environmental, social and governance risks,

including physical risks and transition risks as per Article 35 of IFD. The information on ESG

shall be disclosed once in the first year and biannually thereafter.

Investment Firms which meet the criteria of Paragraph 26(8)(a) of the Law, whose on-and-off

balance sheet assets on average over the 4 year period are less than €100m are exempted from

the disclosure of information on environmental, social and governance risks, including physical

risks and transition risks as per Article 35 of IFD.

The Group’s average on and off-balance sheet assets for the preceding four-year period are less

than €100m and as such it meets the criteria of the paragraph 26(8) of the Law. Therefore, the

Group is exempted from the disclosures requirement regarding ESG.

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9. APPENDIX – SPECIFIC REFERENCES TO THE IFR

IFR

Reference

High Level Summary

Section

Scope of disclosure requirements

46 (1)

Requirement to publish market disclosures, on the date of

publication of the annual financial statements.

1.2

46 (2)

Requirement to publish market disclosures for small and non-

interconnected IFs

N/A

46 (3)

Requirement to publish market disclosures for IFs which do not

longer meet the criteria of small and non-interconnected IF

N/A

46 (4)

Market disclosures to be published in an appropriate medium, or

provide clear cross-references to other media.

1.4

Risk management objectives and policies

Disclosure of the risk management objectives and policies for

each separate category of risk set out in Parts Three, Four and

Five of the IFR, including a summary of the strategies and

processes to manage those risks and a concise

risk statement approved by the investment firm’s management

body succinctly describing the investment firm’s overall risk

profile associated with the

business strategy

1.5, 4.1, 4.5

Governance

48 (a)

Disclosure of the number of directorships held by members of

the management body

2.4

48 (b)

The policy on diversity with regard to the selection of members

of the management body, its objectives and any relevant targets

set out in that policy, and the extent to which those objectives

and targets have been achieved

2.3, 2.5

48 (c)

whether or not the investment firm has set up a separate risk

committee and the number of times the risk committee has met

annually

2.2

Own Funds

49 (1) (a)

Full reconciliation of Common Equity Tier 1 items, Additional

Tier 1 items, Tier 2 items and applicable filters and deductions

applied to own funds of the investment firm and the balance

sheet in the audited financial statements of the IF;

3.3

49 (1) (b)

Description of the main features of the Common Equity Tier 1

and Additional Tier 1 instruments and Tier 2 instruments issued

by the IF

3.2

49 (1) (c)

Description of all restrictions applied to the calculation of own

funds in accordance with the IFR and the instruments and

deductions to which those restrictions apply

3.1

49 (2)

EBA shall develop implementation standards for points (a), (b),

N/A

Own Funds Requirements

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50 (a)

Summary of IF’s approach to assessing adequacy of its internal

capital to support current and future activities.

4.2

50 (b)

Result of ICARA upon request of the competent authority.

50 (c)

K-factor requirements calculated in aggregate form for RtM,

RtF, and RtC, based on the sum of the applicable K‐factors

4.1.3

50 (d)

Fixed overheads requirement

4.1.2

Remuneration policy and practices

Remuneration policy, including aspects related to gender

neutrality and the gender pay gap, for those categories of staff

whose professional activities have a material impact on the risk

profile

51 (a)

Design characteristics of the remuneration system, including the

level of variable remuneration and criteria for awarding variable

remuneration, payout in instruments policy, deferral policy and

vesting criteria

51 (b)

Ratios between fixed and variable remuneration

51 (c)

Aggregated quantitative information on remuneration, broken

down by senior management and members of staff whose actions

have a material impact on the risk profile of the investment firm

51 (c)(i)

The amounts of remuneration awarded in the financial year, split

into fixed and variable remuneration, and the number of

beneficiaries

51 (c)(ii)

The amounts and forms of awarded variable remuneration

51 (c)(iii)

The amounts of deferred remuneration awarded for previous

performance periods

N/A

51 (c)(iv)

The amount of deferred remuneration due to vest in the financial

year

N/A

51 (c)(v)

The guaranteed variable remuneration awards during the

financial year and the number of beneficiaries of those awards

N/A

51 (c)(vi)

The severance payments awarded in previous periods, that have

been paid out during the financial year

N/A

51 (c)(vii)

The amounts of severance payments awarded during the

financial year, split into paid upfront and deferred, the number of

beneficiaries of those payments and the highest payment that has

been awarded to a single person

N/A

51 (d)

Whether the IF benefits from a derogation laid down in Article

32(4) of the IFD

Investment policy

Not applicable due to criteria referred to in point (a) of Article 32

(4) of the IFD

Environmental, social and governance risks

Not applicable due to criteria referred to in point (a) of Article 32

(4) of the IFD