Registered number:
06039502
FINOTEC TRADING UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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FINOTEC TRADING UK LIMITED
COMPANY INFORMATION
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Chartered Accountants
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Statutory Auditor
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FINOTEC TRADING UK LIMITED
CONTENTS
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Independent Auditors' Report
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Statement of Income and Retained Earnings
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Statement of Financial Position
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Notes to the Financial Statements
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FINOTEC TRADING UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their strategic report for the year ended 31 December 2020.
Finotec is a long-established financial service intermediary and investment management firm, operating an execution only trading platform and specializing in OTC and exchange-based trading venues.
Finotec is incorporated in England and Wales and is authorised and regulated by the Financial Conduct Association (registration number 470392), and is subject to prudential regulation in accordance with the Capital Requirements Regulation (“CRR”). For the purpose of the CRR, Finotec is regulated on a solo basis because its holding company is outside of the European Union.
Finotec target market is that of Professional Traders, Asset Managers and Hedge Fund Operators. Its service consists primarily of the consolidation of multiple liquidity sources offered via API connections.
BUSINESS REVIEW
Finotec provides a diverse range of customized services to its clientele, as well as the tools and systems needed to setup and operate their flourishing FX Business.
Since 2008, Finotec has operated a Match Principal business model, ensuring that its interests would always align with those of its clients’. This decision was based on the realisation that its own earning potential shared strong correlation to its clients’ Life-Time-Value; and in order to encourage a strong sentiment of success from its clients, it would need to match its clients’ orders with the market, thereby removing any possible conflict of interest.
Finotec offers execution and clearing as well as ancillary technology and investment management solutions to Professional Traders & Brokers, Investors, Asset Manager and Hedge Fund Operators.
Finotec does not onboard or service retail clients.
Core to Finotec’s strategy is that it’s a “serviced based” business, and is not in the business of “taking risks”. As a consolidator of liquidity, Finotec’s is able to eliminate one of the most significant risks its business faces; by providing connectivity from a wide selection of liquidity providers, rather than a direct connection to a less broad selection.
This direction supports and facilitates:
• Confidence that all clients are able to access the best available prices at any point of time
• Continuity of service in the event of a disruption to any single liquidity provider or connection
Finotec mitigates its risk of being dependent on active clients by selectively negotiating minimum monthly volume fees, as well as monthly technology and/or service fees. These fees act as a source of stable income for the Firm, and are generated irrespective of whether the client has been sufficiently active during a given period.
Additionally, Finotec’s direct cost base is largely variable, which translates to a proportionate reduction in its cost base should the Firm experience a reduction in volume-based income. Finotec’s fixed overhead costs are equally considered, with a relatively modest footprint for its size and scale, and in keeping with its position on the avoidance of unnecessary risk.
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FINOTEC TRADING UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
PRINCIPAL RISKS AND UNCERTAINTIES
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The main prudential risks faced by the firm are:
Credit and Counterparty Risk
Because Finotec offers access to the market on a margin basis, there is a risk that our client may incur losses in excess of their initial deposits with us.
We believe that we have effectively mitigated this risk through the implementation of a conservative margining process. We have only once experienced a client debt, which came as the result of the decoupling of the Swiss Franc.
Conversely, we have credit and counterparty exposures on the market facing side of our business, however, as a Matched Principal broker, and by carefully selecting our market side counterparties, we can reduce this risk exposure and have had to date, no bad debts.
Market Risk
We do not run a proprietary trading book. However, we do have treasury balances in foreign currencies as a result of operational needs or the accrual of revenue in other currencies.
We have traditionally accepted this as a cost of running our business rather than seeing it as a risk.
Liquidity Risk
A more pressing risk than credit risk is liquidity risk. In the event that a client were to lose more than they had deposited with us as margin, the exposure would be subject to only an 8% capital requirement under Pillar one until such time as it was collected. However, we would need to pay those losses to our market side broker immediately. We would therefore need 100% liquidity cover for any losses immediately - even if the debt were to be collected within hours.
We have a two-fold approach to liquidity risk. First, our margining process, although designed primarily to address credit risk, seeks to prevent any potential debts in the first place. Second, we monitor our gross positions with our market side brokers on a daily basis alongside our available liquidity. We seek to ensure that our free liquidity is more than 20% of our largest gross currency position. We will adjust our margin requirements for relevant currency pairs if necessary to achieve this.
We are satisfied that this combination of tools has effectively mitigated our exposure to liquidity risk.
CLIENT FUND PROTECTION
Investors benefit from additional securities that are uniquely offered by Finotec with FSCS Deposit Protection Insurance by Lloyds on client funds of GBP 500,000 per account (additional protection is available if required).
GOING CONCERN
The directors have reviewed their projections and forecasts and consider that they have adequate resources to continue to meet FCA capital adequacy requirements and future working capital.
FINANCIAL KEY PERFORMANCE INDICATORS
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During 2020, Finotec’s turnover income was $2.2 million whilst clearing approx. 33 billion of client transactions. This represents a 46% increase in revenue as well as a 110% increase in volume-based transactions as compared to 2019.
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FINOTEC TRADING UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
OTHER PERFORMANCE INDICATORS
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2020 was a challenging period, largely due to the uncertainty left in the wake of Brexit and its impact on the UK’s financial markets, as well as due to the wide spread of novel coronavirus (“COVID 19”) that was declared by the World Health Organization (“WHO”) as a global pandemic on January 30th 2020.
Despite this, Finotec’s continues to attract interest in its growing portfolio of higher tier products and services and has recently expanded into the provision of Hedge Fund solutions to regulated Asset Managers. Finotec’s Hedge Fund setup process can be ready in as little as 2 weeks and provides exception value when compared to mainstream solutions currently on the market, costing as little as 15,000 EUR to setup and from 2,000 EUR monthly service fee.
Finotec’s Hedge Fund solution is particular aimed at Asset managers that have:
• Their own branded financial product
• An amazing trading strategy
• Connections to high-net-worth investors
Additionally, Finotec continues to develop its risk management software with additional layers of artificial intelligence. The intention is to further refine the algorithm’s decision based self-learning engine in order to better predict the impact of low volatility on the market.
Finotec’s minimum entry to any of its investment programs remains at $100,000, with clients paying an Execution fee of $15 per million. The immediate consideration for Finotec is a monthly transaction volume of more than $US1 billion for each $US1 Million AUM, which would generate an additional income of up to $15,000 (including price improvements) per month.
Finotec’s target is to reach $US20 million in total deposits by the end of 2021.
Finotec’s management is also exploring a corporate transaction with YCM for the purpose of integrating the revenues generated from Management and Performances fees with Finotec.
FCA PILLAR 3 DISCLOSURE
The FCA Pillar 3 unaudited disclosures are published and updated annually on the company's website at www.finotec.com.
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FINOTEC TRADING UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
DIRECTORS' STATEMENT OF COMPLIANCE WITH DUTY TO PROMOTE THE SUCCESS OF THE COMPANY
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The Director of the Company is acutely aware of the requirement for them to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. In considering this duty the Director considers the following stakeholders:
Shareholders
The Director has regular contact with the shareholder in order to maximise the Company's long-term growth prospects and the opportunity for a dividend stream.
Customers
The Company's customer base ranges from large institutional clients to professional clients.
The Director priorities compliance with the FCA Client Money rules to ensure the funds of relevant clients are protected, whilst ensuring each client's best interests are served in accordance with their risk appetite.
Suppliers
The company has various key supplier/vendor relationships which work more as a partnership to ensure the smooth running of the business as well as various streams of support where necessary.
Community and the environment
The Company actively seeks to reduce its carbon footprint by virtue of its entirely online and paperless business.
The Director also encourages regular attendance at industry related networking events in order to build and maintain strong relationships within the forex community.
This report was approved by the board
and signed on its behalf.
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FINOTEC TRADING UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their report and the financial statements for the year ended 31 December 2020.
DIRECTORS' RESPONSIBILITIES STATEMENT
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The directors are responsible for preparing the Strategic Report, the Directors' Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year
. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
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select suitable accounting policies for the Company's financial statements and then apply them consistently;
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make judgments and accounting estimates that are reasonable and prudent;
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state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in Directors' Reports may differ from legislation in other jurisdictions.
The principal activity of the company in the period under review was that of brokerage in foreign exchange (“FX”) and contracts for differences (“CFDs”) mainly for professional clients.
The profit for the year, after taxation, amounted to £
313,792
(2019 -
£
59,774
)
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The directors recommend that no dividend is paid.
The directors who served during the year were:
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FINOTEC TRADING UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The future developments of the business are disclosed in the Strategic Report.
DISCLOSURE OF INFORMATION TO AUDITORS
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Each of the persons who are
directors at the time when this Directors' Report is approved has confirmed that:
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so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
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the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
POST BALANCE SHEET EVENTS
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There have been no significant events affecting the Company since the year end.
Under section 487(2) of the Companies Act 2006, Berg Kaprow Lewis LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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FINOTEC TRADING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FINOTEC TRADING UK LIMITED
We have audited the financial statements of Finotec Trading UK Limited (the 'Company') for the year ended 31 December 2020, which comprise the Statement of Income and Retained Earnings, the Statement of Financial Position, the Statement of Cash Flows
and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
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give a true and fair view of the state of the Company's affairs as at 31 December 2020 and of its profit for the year then ended;
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have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
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have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
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In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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FINOTEC TRADING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FINOTEC TRADING UK LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
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In our opinion, based on the work undertaken in the course of the audit:
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the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
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the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
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In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
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adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
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the financial statements are not in agreement with the accounting records and returns; or
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certain disclosures of directors
' remuneration specified by law are not made; or
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we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
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As explained more fully in the Directors' Responsibilities Statement set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
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FINOTEC TRADING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FINOTEC TRADING UK LIMITED (CONTINUED)
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
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Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
[Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud.]
As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
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Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control.
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Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
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Conclude on the appropriateness of the directors
' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors' Report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors' Report. However, future events or conditions may cause the Company to cease to continue as a going concern.
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Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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FINOTEC TRADING UK LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FINOTEC TRADING UK LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Ian Saunderson FCA
(Senior Statutory Auditor)
for and on behalf of
Berg Kaprow Lewis LLP
Chartered Accountants
Statutory Auditor
London
28 April 2021
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FINOTEC TRADING UK LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2020
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Retained earnings at the beginning of the year
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RETAINED EARNINGS AT THE END OF THE YEAR
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The notes on pages 14 to 25 form part of these financial statements.
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FINOTEC TRADING UK LIMITED
REGISTERED NUMBER:
06039502
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2020
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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TOTAL ASSETS LESS CURRENT LIABILITIES
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by
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The notes on pages 14 to 25 form part of these financial statements.
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FINOTEC TRADING UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
CASH FLOWS FROM OPERATING ACTIVITIES
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<-- Enter row heading -->
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Amortisation of intangible assets
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Depreciation of tangible assets
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Increase/(decrease) in creditors
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Revaluation of intangible
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NET CASH GENERATED FROM OPERATING ACTIVITIES
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of intangible fixed assets
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Sale of intangible assets
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Purchase of tangible fixed assets
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NET CASH FROM INVESTING ACTIVITIES
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
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Cash and cash equivalents at beginning of year
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CASH AND CASH EQUIVALENTS AT THE END OF YEAR
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CASH AND CASH EQUIVALENTS AT THE END OF YEAR COMPRISE:
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The notes on pages 14 to 25 form part of these financial statements.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The principal activity of Finotec Trading UK Limited ('the company') is that of brokerage in foreign exchange (“FX”) and contracts for differences (“CFDs”) mainly for professional clients.
The company is a private limited company incorporated in England and Wales.
The principal place of business is; Mappin House, Oxford Circus, London, W1W 8HF.
2.
ACCOUNTING POLICIES
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BASIS OF PREPARATION OF FINANCIAL STATEMENTS
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The financial statements have been prepared under the historical cost convention and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland ("FRS 102"), and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The financial statements have been prepared on the going concern basis, which assumes that the Company will continue to be able to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements.
The company made a profit of £313,792 during the year, reporting net current liabilities of £12,235 and an overall net asset position of £848,962. The Company, as for any business, relies upon the generation of profits and cash to create working capital to meet its liabilities as they fall due. Based on the results to date and future projections, the directors are confident that the Company will continue to meet its liabilities as they fall due, looking forward at least twelve months from the date of signing these financial statements. The directors have a reasonable expectation that the company has adequate resources to meet Financial Conduct Authority capital adequacy and future working capital requirements and to continue in operational existence for the foreseeable future and they consider it appropriate to prepare the financial statements on a going concern basis. As a result, the directors have prepared the financial statements on a going concern basis.
Although the Covid-19 pandemic has resulted in an uncertain environment, the directors have a reasonable expectation, based on their assessment of the Company's financial position and resources, that it will continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of these financial statements, and will be able to meet its debts as they fall due. The directors therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.
ACCOUNTING POLICIES (CONTINUED)
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TURNOVER AND REVENUE RECOGNITION
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Turnover represents spread and commission income earned on brokerage services provided. It includes profits and losses on rolling spot foreign exchange trading and CFDs (contracts for difference).
Turnover is recognised when the trades are executed.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
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the amount of revenue can be measured reliably;
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it is probable that the Company will receive the consideration due under the contract;
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the stage of completion of the contract at the end of the reporting period can be measured reliably; and
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the costs incurred and the costs to complete the contract can be measured reliably.
Intangible assets are initially recognised at cost. After recognition, under the revaluation model, intangible assets shall be carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated amortisation and subsequent impairment losses - provided that the fair value can be determined by reference to an active market.
Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting date.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.
ACCOUNTING POLICIES (CONTINUED)
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TANGIBLE FIXED ASSETS (CONTINUED)
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Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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CASH AND CASH EQUIVALENTS
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
In the Statement of Cash Flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Company's cash management.
Cash equivalents represent balances held with the company's liquidity providers on a mark-to-market basis.
The Company only enters into basic financial instruments and transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, and loans to related parties.
(i) Financial assets
Basic financial assets, including trade and other debtors, and amounts due from related companies, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Such assets are subsequently carried at amortised cost using the effective interest method.
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the Statement of Income and Retained Earnings.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.
ACCOUNTING POLICIES (CONTINUED)
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FINANCIAL INSTRUMENTS (CONTINUED)
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(ii) Financial liabilities
Basic financial liabilities, including trade and other creditors and accruals, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
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CORONAVIRUS JOB RETENTION SCHEME INCOME AND EXPENDITURE
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Furlough income is receivable as compensation for salary expenses already incurred and to give immediate financial support to the Company with no future related costs. This income is recognised in the Statement of Income and Retained Earnings in the same period as the related expenditure.
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FOREIGN CURRENCY TRANSLATION
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Functional and presentation currency
The company's functional and presentational currency is Sterling.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end, foreign currency monetary items are translated using the closing rate at the year end. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
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OPERATING LEASES: THE COMPANY AS LESSEE
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Rentals paid under operating leases are charged to profit or loss on a straight line basis over the lease term.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.
ACCOUNTING POLICIES (CONTINUED)
DEFINED CONTRIBUTION PENSION PLAN
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Company in independently administered funds.
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JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY
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The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial
statements:
(i) Useful economic lives of tangible assets
The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.
(ii) Useful economic lives of intangible assets
The annual amortisation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments and economic utilisation.
(iii) Deferred tax
The annual deferred tax charge is sensitive to changes in the estimated future profits that will be offset against tax losses. The deferred tax charge is re-assessed annually. They are amended when necessary to reflect current estimates and future projections.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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An analysis of turnover by class of business is as follows:
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All turnover arose within the United Kingdom.
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The operating (loss)/profit is stated after charging/(crediting):
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Depreciation of tangible fixed assets
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Amortisation of intaginble fixed assets
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Other operating lease rentals
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Fees payable to the Company's auditor and its associates for the audit of the Company's annual accounts
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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Staff costs, including directors' remuneration, were as follows:
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The average monthly number of employees, including the directors, during the year was as follows:
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Management and administration
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Company contributions to defined contribution pension schemes
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During the year retirement benefits were accruing to no directors
(2019 -
1
)
in respect of defined contribution pension schemes.
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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There is no tax provision in the financial statements due to the availability of tax losses.
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FACTORS AFFECTING TAX CHARGE FOR THE YEAR
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The tax assessed for the year is lower than
(2019 - lower than)
the standard rate of corporation tax in the UK of
19
%
(2019 -
19
%)
. The differences are explained below:
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Profit on ordinary activities before tax
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Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2019 - 19%)
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Expenses not deductible for tax purposes, other than goodwill amortisation and impairment
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Capital allowances for year in excess of depreciation
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Utilisation of tax losses
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TOTAL TAX CHARGE FOR THE YEAR
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FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
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The company has trading losses of approximately £3,294,000 (2019 - £3,537,000) that can be offset against future taxable profits. A deferred tax asset has not been recognised due to the uncertainty of future profits. The amount not provided for is approximately £639,000 (2019 - £672,000).
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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Charge for the year on owned assets
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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Charge for the year on owned assets
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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Amounts owed by group undertakings
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Prepayments and accrued income
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CASH AND CASH EQUIVALENTS
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Included within cash and cash equivalents is £1,340,599 (2019 - £603,963) held with the company's liquidity providers.
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CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
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Other taxation and social security
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Accruals and deferred income
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Client deposits - professional
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ALLOTTED, CALLED UP AND FULLY PAID
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4,112,961
(2019 -
4,112,961
)
Ordinary
shares of £
1
each
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FINOTEC TRADING UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Profit and loss account
Includes all current and prior period retained profits and losses.
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COMMITMENTS UNDER OPERATING LEASES
|
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At 31 December 2020 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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RELATED PARTY TRANSACTIONS
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Intangible assets of £31,362 (2019 - £400,457) were purchased from other related parties in the year.
Key management remuneration is detailed in note 8 above.
Included within directors' remuneration is a balance of £49,314 (2019 - £48,762) paid to a related party with a common director.
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The ultimate parent undertaking is Yedidya Capital Markets Limited, a company incorporated in Israel, whose principal place of business is Rehov Kanfei Nesherim 68/108, 9546457 Jerusalem, Israel.
The ultimate controlling party is D Essemini.
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The company holds money on behalf of retail clients. These funds are held separately from money belonging to the company and are subject to the client money rules as prescribed by the Financial Conduct Authority. At no time does the company have any legal title to the monies. Accordingly, they are not reflected in the company's balance sheet. As at 31 December 2020, the balance held in client accounts was £10,367 (2019 - £114,321).
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