Policy on Remuneration and Incentives under Article 18 of Ordinance № 50 on Capital Adequacy and the Solvency of Investment Firms and Regulation № 2017/565

I. GENERAL PROVISIONS

Article 1. (1) The Remuneration Policy aims to create a common framework for remuneration management of Investment Intermediary FH Ever Inc. in all forms such as salaries, material incentives, including benefits related to retirement for the following categories of staff:
1. the senior management staff;
2. employees whose activity is related to risk-taking;
3. employees performing control functions and
4. all employees, whose remuneration is proportional to remuneration of employees under items 1 and 2 and whose activity has a significant impact on the risk profile of the investment intermediary (II).
(2) This Policy has been prepared in accordance with the requirements of Section IV of Ordinance No. 50 on capital adequacy, the solvency of investment firms and the supervision of their compliance (Ordinance No. 50) and Article 27 of Delegated Regulation No. 2017/565. This Policy has been adopted in accordance with Ordinance No. 58 of 28 February 2018 on the requirements for the protection of clients’ financial instruments and cash, for the management of products and for granting or receiving remuneration, commissions, other cash or non-cash benefits.

Article 2. The Remuneration Policy shall correspond to the nature, scale and complexity of the activity, the internal organization and the scope of performed investment services and activities, and it applies the following principles:
1. ensuring the reliable and effective risk management and non-encouragement of taking a risk which exceeds the levels acceptable for the investment intermediary;
2. ensuring compliance with the strategy, goals, values and long-term interests of the investment intermediary and implementation of measures for avoiding conflicts of interests.
This Policy shall promote responsible business conduct, fair treatment of clients, including in the event of conflicts of interest.

Article 3. (1) The amount of remuneration is indirectly affected by the basic principle of risk reporting and is linked to capital planning, liquidity and maintaining a sound capital base.
(2) The purpose of FH Ever Inc. in the Remuneration Policy shall be to attract and retain highly qualified, motivated and quality employees.
(3) An obligatory principle of the Remuneration Policy shall be fair and non-discriminatory treatment.
(4) In the context of dynamic environment and constantly changing labor markets, FH Ever Inc. intends to offer competitive remuneration. Therefore, it is necessary to constantly monitor the labor market conditions in the financial sphere and adapt to its practices.

Article 4 (1). The Remuneration Policy aims and ensures that the II’s clients are appropriately treated and the remuneration allocated within the II does not harm their interests in the short, medium and long term.
(2) A basic principle in the adoption and implementation of this Policy shall be to ensure the absence of conflicts of interest or incentives, as a result of which the persons concerned could prefer their own interests or the interests of the intermediary to the potential detriment of one or another client.

II. REMUNERATION POLICY

Article 5. The Board of Directors of FH Ever Inc. adopts this Policy in agreement with the Internal Control Department. This Policy is approved by the General Meeting of Shareholders of the II. The nature, scale and complexity of the intermediary’s activity, the structure of its internal organization and the scope of the performed investment services and activities have been taken into account in its development.

 

ІІІ. TYPES OF REMUNERATION PAID OUT BY THE INVESTMENT INTERMEDIARY

Article 6. (1) In accordance with current legislation, remuneration may be fixed and variable.
(2) Fixed remuneration includes payments the amount of which depends on an employee’s professional experience and functional duties of the position indicated in their job description, as part of the terms and conditions of the employment contract or in the management contract, and which correspond to the objectives of the position, level of seniority and other factors for the provision of a professional service determined by the job description or a range of functions.
(3) Variable remuneration includes additional payments or incentives that are linked to the permanent performance of the II and are in line with the risks taken, and with the performance exceeding the requirements specified in the job description of the employee as part of the employment contract or in the management contract.

Article 7. (1) The variable remuneration is linked to the II’s performance, its total amount is determined as a combination of the appraisal of the performance of the respective employee, of the respective department, and of the overall performance of the investment intermediary. The appraisal of the performance of each employee shall be based on financial and non-financial criteria.
(2) The appraisals under Paragraph 1 shall cover a period of several years, so that the appraisal process will be based on the long-term performance of the activity, and the payment of the elements of the variable remuneration based on the results shall be allocated for a period taking into account the economic cycle and risks taken by the investment intermediary.
(3) The appraisal of the II’s performance used for calculation of the variable elements of the remuneration and their allocation shall include adjustment for all types of present and future risks and shall take into account the price of the capital, and the required liquidity as well.
(4) The variable remuneration shall be determined so that its total amount will not limit the ability of the investment intermediary to maintain and improve its capital base.

Article 8. Severance benefits will be paid only in cases where, according to the grounds for termination, such are payable under the requirements of the Labor Code.

Article 9. In accordance with this Policy, the Board of Directors of II FH Ever Inc. determines only fixed remuneration which is individualized in employment contracts of persons working for it. If a person is a party to a service contract with II FH Ever Inc., his/her remuneration shall be set out in the contract. The remuneration of the members of the Board of Directors shall be set out in their management contracts, and of the procurator – in the procuration agreement.

Article 10. (1) The investment intermediary shall not pay and determine variable remuneration and shall not envisage benefits related to retirement.
(2) If the Board of Directors of II FH Ever Inc. passes a resolution to allocate variable remuneration, then the permanent and variable components of the remuneration shall be permanently maintained to prevent the structure of remuneration from favoring the interests of the investment intermediary or the persons working for it at the cost of impairing interests of one or another client.

Article 11. The Board of Directors does not determine a guaranteed variable remuneration due to the fact that it is not compatible with prudent risk management and the pay-for-performance principle. The determination of guaranteed variable remuneration is not included in future remuneration plans.

Article 12. FH Ever Inc. shall not benefit from exceptional state aid.

Article 13. (1) The officers performing control functions shall be independent from the II’s employees over whom they exercise control. These officers shall have appropriate powers and shall be remunerated as appropriate to the attainment of the objectives related to their functions, irrespective of the results achieved by the departments which they control. The opportunity provided to the respective officer to access information, documentation of the II, and the full assistance of other employees in the company, the procurator and the members of the Board of Directors in exercising his/her activity, shall include appropriate powers within the meaning of this paragraph.
(2) The remuneration of the head of the Internal Control Department and the head of the Risk Management Department /in case such a department has been established/ shall be supervised directly by the Remuneration Committee, when and if such has been established. If such a committee is not established, the supervision shall be performed by the Board of Directors of the company.

Article 14. Employees of the investment intermediary and persons working for it under service and management contracts are prohibited from using personal hedging or insurance strategies related to remuneration or liability in order to reduce the effect of reporting of the risk inherent in their remuneration.

Article 15. The amount of fixed remuneration may be annually updated and on the basis of received market information about the expected changes of remuneration on the labor market in the II’s field of activity and shall be taken into account in drawing up the budget.

ІV. DISCLOSURE OF INFORMATION

Article 16. (1) In view of the Remuneration Policy, the II shall make public, immediately after the approval of the Board of Directors, at least the following information about those categories of staff whose professional activities have a significant impact on the risk profile of the II:
(a) information on the decision-making process used for determining the Remuneration Policy and the number of meetings held by the Board of Directors in the financial year, including, if applicable, information on the external consultant whose services are used to determine the Remuneration Policy and the role of the relevant stakeholders;
b) information on link between pay and performance – as of the date of approval of these rules, no such information is provided for;
c) aggregate quantitative information on remuneration broken down by business area;
d) aggregate 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 institution, indicating the following:
✔ the amounts of remuneration for the financial year and the number of beneficiaries;
✔ the amounts of outstanding deferred remuneration, split into vested and unvested portions – as of the date of approval of these rules such is not provided for;
✔ new sign-on and severance payments made during the financial year, and the number of beneficiaries of such payments;
✔ the amount of severance payments awarded during the financial year, number of beneficiaries and highest such award to a single person;

e) upon demand from the Financial Supervision Commission – the total remuneration for each member of the Board of Directors, the procurator, the senior management respectively.
(2) The investment intermediary shall observe the guidelines of EBA adopted by the Financial Supervision Commission for the conduct of reasonable remuneration policies, in compliance with the principles laid down in the effective regulations.

V. POLICY ON INCENTIVES, REMUNERATION, COMMISSIONS AND NON-CASH BENEFITS RECEIVED FROM THE INVESTMENT INTERMEDIARY

Article 17. (1) The II shall not have the right to pay, respectively to provide and receive remuneration, commission or non-cash benefit for the provision of investment or ancillary services to a client, except in the cases under Article 72, Paragraph 2 and Article 73, Paragraph 1 of MFIA.
(2) The payment, respectively the provision, of the remuneration, the commission or the non-cash benefit shall be made with a view to improving the quality of the service and does not violate the obligation of the II to act honestly, correctly, professionally and in the best interest of the client, where it
1. is justified by the provision of an ancillary service or a service of high value to the respective client, which is proportional to the scope of the received incentive;
2. does not directly benefit the recipient investment intermediary, its shareholders or employees, without at the same time providing a substantial benefit for the respective client;
3. the incentive is justified by the provision of a benefit for the respective client.
(3) The fulfillment of the condition under Paragraph 2, item 1 may include:
1. the provision of non-independent investment advice on and access to a wide range of suitable financial instruments including an appropriate number of instruments from third party product providers having no close links with the investment intermediary;
2. the provision of non-independent investment advice combined with either: an offer to the client, at least on an annual basis, to assess the continuing suitability of the financial instruments in which the client has invested; or with another on-going service that is likely to be of value to the client, such as advice about the suggested optimal asset allocation of the client;
3. the provision of access, at a competitive price, to a wide range of financial instruments that are likely to meet the needs of the client, including an appropriate number of instruments from third party product providers having no close links with the investment intermediary, together with either the provision of added-value tools, such as objective information tools helping the relevant client to take investment decisions or enabling the relevant client to monitor, model and adjust the range of financial instruments in which they have invested, or by providing periodic reports on the performance and costs and fees associated with the financial instruments. (4) The remuneration, the commission or the non-cash benefit shall not improve the quality, if as a result of the remuneration, the commission or the non-cash benefit for the provision of the respective services to a client is violated or is biased.
(5) The improved quality of the service that the II provides to the clients must be proportional to the remuneration, commission or non-cash benefit received by the II.

Article 18. (1) The II shall keep evidence that all remuneration, commissions or non-cash benefits provided or received by it are intended to improve the quality of the respective service for the client.
(2) In accordance with Paragraph 1, the II shall maintain records of information on all remuneration, commissions or non-cash benefits received by a third party in relation to the provision of investment or ancillary services. This information shall be kept by the Accounting Department.
(3) The II shall keep records of the manner in which the remuneration, commissions or non-cash benefits provided or received by the II, or those which the II intends to use, improve the quality of services provided to the respective clients and the measures taken in order not to violate their obligation to act honestly, correctly, professionally and in the best interest of the client.
Article 19. (1) Before the provision of an investment or ancillary service, the II shall provide the client with information in accordance with Article 73, Paragraph 1, item 2(b) of MFIA for each payment or any benefit received from or provided to third parties.
(2) Insignificant non-cash benefits may be described more generally in the information under Paragraph 1 and other non-cash benefits provided or received by the Investment Intermediary in relation to the investment service provided to the client shall be valued and disclosed separately.
(3) Where the II has failed to establish in advance the amount of each payment or each benefit for receipt or payment, but instead it has disclosed to the clients the method of calculating the amount, the II shall provide its clients with subsequent information on the exact amount of payment or the benefits that are granted or received.
(4) The II shall, at least once a year, while receiving incentives in relation to the investment services provided to the respective clients, provide information to each of its clients on the actual amount of payments or benefits provided or received. Insignificant non-cash benefits may be summarized in the information.
(5) In accordance with Paragraphs 1 – 4, the II shall observe the requirements of Article 71, Paragraph 5 of the MFIA and Article 50 of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (Regulation (EU) No. 2017/565) (OB, L 87/1 of 31.03.2017).
(6) Where more than one investment intermediary participates in a channel for distribution of financial instruments, each of the investment intermediaries providing investment or ancillary service shall fulfill its obligations to provide information under Paragraphs 1 – 5 to its clients.

VI. REQUIREMENTS FOR THE PROVISION OR RECEIPT OF REMUNERATION, COMMISSIONS OR OTHER CASH OR NON-CASH BENEFITS IN RESPECT OF INDEPENDENT INVESTMENT ADVICE OR PORTFOLIO MANAGEMENT

Article 20. The investment intermediary shall adopt and apply this Policy to ensure that all remuneration, commissions or monetary benefits provided or received by a third party or a person acting on behalf of a third party in relation to the provision of independent investment advice or portfolio management are allocated and transferred to the customer.

Article 21. (1) Where the II provides independent investment advice or portfolio management, the II shall transfer in full to clients all remuneration, commissions or cash benefits paid or provided by a third party or a person acting on behalf of a third party in respect of the services provided to that customer as soon as possible after their receipt, but not later than 5 working days of receiving thereof.
(2) The II shall inform the clients about the remuneration, commissions or monetary benefits which have been transferred to them through periodic statements or in another way on a permanent medium.

Article 22. (1) Where the II provides independent investment advice or portfolio management, it shall not have the right to accept non-cash benefits, except as an exception, and when they meet the conditions for acceptable insignificant non-cash benefits under Paragraph 2-4
(2) Acceptable insignificant non-cash benefits are benefits that are reasonable and proportionate and the amounts of which are unlikely to influence the behavior of the investment intermediary in a way that would harm the interests of the respective client.
(3) Acceptable insignificant non-cash benefits are only benefits that represent:
1. information or documentation related to a financial instrument or investment service which is of general nature or is personalized in order to reflect the circumstances of an individual client;
2. materials in writing from a third party, which have been ordered and paid for by a corporate issuer or a potential issuer for promotion of a new issue of the company, or where a contract has been concluded with a third party and it has received payment from the issuer to prepare such materials on current basis, provided that the relationships are clearly disclosed in the materials and that the materials are made available simultaneously to all investment firms wishing to receive them or to the general public;
3. participation in conferences, seminars and other training events regarding the benefits and characteristics of a specific financial instrument or investment service;
4. representation expenses with a reasonable minimum value, such as expenses for food and drinks for business meetings, conferences, seminars or other training events referred to in item 3.
(4) Prior to the provision of the respective investment or ancillary services to clients, the II shall disclose information about the insignificant non-cash benefits. The insignificant non-cash benefits can be described more generally in the information.

VII. REQUIREMENTS FOR PROVIDING OR RECEIVING REMUNERATION, COMMISSIONS OR OTHER CASH OR NON – CASH BENEFITS IN RELATION TO A RESEARCH.

Article 23. (1) The preparation of a research for the II by a third party, where the II provides portfolio management or other investment or ancillary services to clients, shall not be considered as an incentive if it is received against:
1. direct payments with funds of the investment intermediary; or
2. payments from a separate research payment account of the II which shall be financed through a special research fee charged to the client, and provided that the requirements under Paragraph 2 of this article, and under Article 24, Paragraph 1 and Article 25, Paragraph 1 of this Policy are complied with.
(2) The II shall control and bear responsibility for the research payment account under Paragraph 1, item 2.
(3) The II may assign the management of the research payment account under Paragraph 1, item 2 to a third party, provided that this arrangement facilitates the purchase of a research by a third party and the payments of research providers in the name of the investment intermediary, without causing unreasonable delay in accordance with the internal rules and procedures of the investment intermediary.

Article 24. (1) The II shall determine a research budget and shall regularly review the budget according to the following internal procedure: the Financial Analyst and/or the Investment Adviser shall notify the Board of Directors of the need to conduct research by third parties by the end of November of the current calendar year. The Board of Directors shall review the proposals made by the 15th day of December of the current calendar year, and may request additional information and order additional offers to be sought. By the end of December of the current calendar year, the Board of Directors shall adopt the research budget for the next calendar year. The budget shall be subject to regular review by the Board of Directors once a quarter.
(2) The investment intermediary shall accept and apply the following internal procedure for refunding clients’ funds representing a surplus on the account under Article 23, Paragraph 1, item 2: In case that there is a surplus in the account at the end of the calendar year, the Accounting Department shall calculate what part of the surplus should be refunded to the clients according to the fees paid by them. If clients have agreed so in advance, the surplus shall be deducted from the research budget and the research fee which is calculated for the next calendar year. In case that a client does not agree to such offsetting and the same has not given prior consent, the respective part of the surplus shall be paid to the account they have provided to the II.

Article 25. (1) The Board of Directors shall once a year until the end of January of the next year evaluate the quality of the purchased researches on the basis of clear quality criteria and their ability to contribute to better investment decisions.
(2) Where the II purchases researches, the Board of Directors shall adopt and apply a policy regulating the performance of the regular evaluation under Paragraph 1.
(3) The policy under Paragraph 2 sets out the extent to which researches purchased through the research payment account can provide benefits to clients’ portfolios, including by taking into account, where appropriate, investment strategies applicable to different types of portfolios and the approach that the intermediary will apply to fairly distribute these costs between the portfolios of different clients.
(4) Where the Board of Directors has adopted the policy under Paragraph 2, the II shall provide it to its clients.

Article 26. (1) The research fee under Article 23, Paragraph 1, item 2: 1. depends only on the research budget determined by the II in order to establish the need of conducting a research by a third party in respect of the investment services provided to its clients, and
2. it is not related to the volume and/or the value of transactions performed on behalf of clients.
(2) Where the research fee is not separately collected, but together with the commission for the transaction, the research fee must be clearly distinguishable and the requirements of Article 23, Paragraph 1(2) and Paragraph 2, Article 24, Paragraph 1, Article 25, Paragraph 1 and Article 27, Paragraph 1 shall be complied with.
(3) The II shall agree with the clients in the contract the research fee as provided for in the research budget, and the frequency with which it will be deducted from the client’s funds during the year.
(4) The total amount of the received research fees may not exceed the research budget.

Article 27. (1) Where the II uses a research payment account, it shall provide to clients:
1. information on the amount of the research amount provided in the budget and the amount of the approximate research fee for the client before providing the investment service to the client,
2. information on all costs for the client in relation to researches by third parties on an annual basis.
(2) When using a research payment account, the II shall, upon request by a client or by the Deputy Chairman of the Financial Supervision Commission in charge of the Investment Supervision Department, provide summarized information about the persons that have prepared the researches who have been paid from that account, the total amount of payments during a given period, the benefits and services received by the investment intermediary and the way in which the total amount spent on the account relates to the budget set by the intermediary for that period, indicating any discounts or transfers if there are available funds in the account.

Article 28. For the purposes of Article 24, Paragraph 1, the research budget shall be managed only by the investment intermediary and shall be based on a reasonable assessment of the need of research by a third party. The II’s Board of Directors shall control the allocation of the budget and its use in the best interest of the II’s clients.
(2) The control referred to in Paragraph 1 shall include clear documentary traceability (audit trail) of the payments to the persons provided researches, and the manner of determining the paid amounts according to the quality criteria under Article 25, Paragraph 1.
(3) The II shall increase the research budget after having provided to the clients clear information about the envisaged increase.

Article 29. The II may not use the research budget and the research payment account to finance internal researches.

Article 30. (1) Where the II provides services for execution of transactions on behalf of clients, it shall determine separate fees for these services which shall reflect only the expenses for the execution of the transaction. The provision of any other benefit or service by an investment intermediary to investment intermediaries established in the European Union shall be subject to a separate fee.
(2) The provision of benefits or services referred to in Paragraph 1 and the fees for them shall not be affected or determined by the levels of payments for the services for execution of transactions on behalf of clients.

VІІІ. ASSESSMENT OF POLICY ADEQUACY

Article 31 (1) The Policy on Remuneration and Incentives shall be adopted by the Board of Directors of FH Ever Inc. and shall be approved by the General Meeting of the Company. The Board of Directors shall review the basic principles of this Policy at least once a year and shall be responsible for its implementation.
(2) The review and update under the first paragraph shall be carried out by 31st of December and shall be submitted to the General Meeting with the report on the activities.
(3) The Internal Control Department shall review the implementation of the Policy on Remuneration and Incentives at least once a year. If it is established that there is a need of change and corrections, the head of the department shall prepare an opinion addressed to the Board of Directors before the expiration of the period under Paragraph 2.

IX. ADDITIONAL PROVISIONS

1. “Remuneration” within the meaning of this Policy and Regulation No. 2017/565 is “all forms of financial or non-financial benefits or payments provided directly or indirectly by the investment intermediary to relevant persons in the provision of investment or ancillary services to clients, such as cash, shares, options, cancellations of loans to relevant persons at dismissal, pension contributions, remuneration by third parties for instance through carried interest models, wage increases or promotions, health insurance, discounts or special allowances, generous expense accounts or seminars in exotic destinations”.
2. “Insignificant non-cash benefit” in the context of this Policy is a benefit provided by a client in the amount of up to BGN 50.

 

X. FINAL PROVISIONS

1. Where problems are identified in the II’s business practice, the overcoming of which requires amendment or supplementation of this Policy, the II’s Board of Directors shall make the respective corrections and submit them for approval to the General Meeting.
2. The Executive Director of the II may issue orders and instructions on the implementation of this Policy.
3. This Policy shall be provided for information and implementation to the employees of the II and relevant persons, and certain sections of it to the II’s clients.
4. The Policy was adopted by the Board of Directors of II FH Ever Inc. by resolution passed at a meeting held on 23 December 2019 and was approved by the II’s Annual General Meeting of Shareholders in 2020.

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