FCA Pillar 3 Disclosure

Disclosure: Risk management objectives and policies.

The rules require us to make specific disclosures in terms of our risk management objectives and policies for each separate category of risk, including the risks referred to under BIPRU 11.5.1 R to BIPRU 11.5.17 R. This document sets out: (1) the strategies and processes to manage those risks; (2) the structure and organisation of the relevant risk management function or other appropriate arrangements; (3) the scope and nature of risk reporting and measurement systems; and (4) the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants.

Implementation of the Capital Requirements Directive is based on three ‘Pillars’, which form the cornerstones of the process.

  • Pillar 1 is the prescribed or minimum capital requirement for an authorised Firm to meet its credit, market and operational risk.
  • Pillar 2 requires a firm to conduct an assessment known as an Internal Capital Adequacy Assessment Process (ICAAP) that considers risks and uncertainties that are not included in Pillar 1 to determine whether the Pillar 1 capital is adequate to meet its risks; and
  • Pillar 3 complements the above and requires firms to publish certain information about their risks, capital and risk management controls and processes.


Blue Water Capital is a UK based company authorised and regulated by the Financial Conduct Authority and provides advisory and arranging services; making us a BIPRU Limited License firm. As such we a have a base capital requirement of £125k. This is then compared with the Basel II Variable Capital Requirement: the higher of (I) the Fixed Overhead Requirement or (II) the sum of the Credit Risk Capital and the Market Risk Capital Requirements to identify whether additional capital should be held.

Under Pillar 2 we ascertain whether other risks might challenge our ability to meet our liabilities as they fall due. As required by the FCA, Blue Water Capital has conducted a systematic Internal Capital Adequacy Assessment Process (“ICAAP”). If this exercise had produced a higher capital requirement than Pillar 1 requirement, this is the amount we would have had to allocate. However, in Blue Water Capital’s case, the results of the ICAAP show that the Pillar 2 requirements are not greater than that for Pillar 1.

Unless otherwise stated, all figures are based on our annual report and are included within that document.

Governance framework

Blue Water Capital has one Director and they are responsible for the process of setting the firm’s risk appetite and risk management processes and for implementing it into the day-to-day business activities of the firm. Appropriate external expertise may be called on as specific needs are identified.

In terms of operational risk we have considered the risk of loss from inadequate or failed internal processes, people and systems or from external events as they would impact on Blue Water Capital or the business activities of the Appointed Representatives for which we act as Principal. The firm manages this risk through identifying potential risk trigger events, quantifying the risks and assessing the controls that the company have put into place to mitigate the risk. These controls include internal and external training, internal compliance reviews, monitoring of activities. Blue Water Capital’s general risk management objective is to develop systems and controls to mitigate risk to a level that does not require the allocation of additional capital.

Capital resources

As indicated in our accounts we have capital and reserves of £222,473

Tier 1 Capital

The Company’s Tier 1 capital comprises ordinary shares, plus retained profit or reserves at the Balance Sheet date.

  • Ordinary share capital £125,000
  • Profit and loss reserves £97,473
  • Core Tier One capital £222,473

Tier 2 Capital

No additions or deductions are made for Tier 2 Capital.

  • Base Capital Resources Requirement £125,000
  • Fixed Overhead Capital Requirement £19,000
  • Credit Risk Capital Requirement £0
  • Market Risk Capital Requirement £0
  • Total Variable Capital Requirement £144,000

Credit risk

This represents the risk of loss due to non-payment for our services. Our experience to date has been a low level of default and we do not anticipate that changing.

Market risk

Our business model is reliant on the activity of a diverse range of Appointed Representatives and our own services. Management accounts are regularly reviewed by the directors to consider profits, cash flow and capital resources. It is not considered that Blue Water’s model represents a business risk requiring additional capital to be allocated.

Stewardship Disclosure

FCA COBS Rule 2.2.3R requires FCA authorised firms to disclose whether they conform to the requirements of the UK Financial Reporting Council’s Stewardship Code (the Code). This defines stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society. Adherence to the Code is voluntary and applies to asset owners and managers as well as service providers such as Blue Water Capital. While we are not a signatory to the Code, we support asset owners in exercising their stewardship responsibilities.

Pillar 3 remuneration disclosures

With one director, who is also the only Code Staff, Blue Water Capital does not have a remuneration committee. The director takes into account the firm’s strategic objectives in setting their remuneration with the aim of encouraging and rewarding good compliance and client service.