Corporate Governance

Scope: This webpage contains information about the measures taken by Atonline Limited (hereon "the Firm") to comply with several Corporate Governance matters. The information is provided pursuant and in compliance with Paragraph 23 of "Directive DI144-2014-14 of The Cyprus Securities And Exchange Commission For The Prudential Supervision of Investment Firms", which transposes "Directive 2013/36/EU Of The European Parliament And Of The Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC". Both directives are presented here below. We are also presenting the associated European Regulation 575/2013.

"Directive DI144-2014-14 of The Cyprus Securities And Exchange Commission For The Prudential Supervision of Investment Firms"	Directive DI144-2014-14
Directive 2013/36/EU Of The European Parliament And Of The Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC	Directive 2013/36/EU
Regulation (EU) No 575/2013 Of The European Parliament And Of The Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012	Regulation (EU) No 575/2013

Country-by-country Reporting: From 1 January 2015 Cypriot Investment Firms (hereon "CIFs") are required to disclose annually, specifying, by Member State and by third country in which it has an establishment, the following information on a consolidated basis for the financial year:

(a)

name(s), nature of activities and geographical location

(b)

turnover;

(c)

number of employees on a full time equivalent basis;

(d)

profit or loss before tax;

(e)

tax on profit or loss;

(f)

public subsidies received.

The information referred to here above shall be audited in accordance with the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009 and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the CIF concerned.

Our approach: Atonline Limited has a branch in the Netherlands and as such, it is subject to the requirements stated here above. Beginning with the Report and Financial Statements for the year ended 31 December 2015, the above stated information is disclosed in the notes to the Financial Statements. The Firm's Report and Financial Statements can be made available upon request at .

Public disclosure of return on assets: CIFs must disclose in their annual report among the key indicators their return on assets, calculated as their net profit divided by their total balance sheet.

Our approach: Beginning with the Report and Financial Statements for the year ended 31 December 2015, the above stated information is disclosed in the notes to the Financial Statements. The Firm's Report and Financial Statements can be made available upon request at .

Remuneration policies: When establishing and applying the total remuneration policies, inclusive of salaries and discretionary pension benefits, for categories of staff including:

• senior management,
• risk takers,
• staff engaged in control functions and
• any employee receiving total remuneration that takes them into the same remuneration bracket as senior management and
• risk takers, whose professional activities have a material impact on their risk profile

CIFs must comply with the following principles in a manner and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities:

(a)

the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking that exceeds the level of tolerated risk of the CIF;

(b)

the remuneration policy is in line with the business strategy, objectives, values and long-term interests of the CIF, and incorporates measures to avoid conflicts of interest;

(c)

the CIF's board of directors adopts and periodically reviews the general principles of the remuneration policy and is responsible for overseeing its implementation;

(d)

the implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the board of directors;

(e)

staff engaged in control functions are independent from the business units they oversee, have appropriate authority, and are remunerated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control;

(f)

the remuneration of the senior officers in the risk management and compliance functions is directly overseen by the remuneration committee or, if such a committee has not been established, by the board of directors;

(g)

the remuneration policy, taking into account national criteria on wage setting, makes a clear distinction between criteria for setting:

• basic fixed remuneration, which should primarily reflect relevant professional experience and organisational responsibility as set out in an employee's job description as part of the terms of employment; and
• variable remuneration which should reflect a sustainable and risk adjusted performance as well as performance in excess of that required to fulfil the employee's job description as part of the terms of employment.

Our approach: Atonline Limited complies with all the requirements stated here above.

In order to enforce the discipline of reviewing the Firm's remuneration policy to ensure that it remains relevant, effective and relevant, and in compliance with the provisions of paragraph (c) here above, we have committed to a process of reviewing the policy at least once per year. The policy is also reviewed and updated on an ad-hog basis, either as a result of changes in the legislation or if any other reason pertains that renders the policy in need of amendment.

In view of complying with the provisions of paragraph (d) here above, the Firm has mandated KPMG Ltd to perform a review, on an annual basis, of the implementation of the remuneration policy.

Variable elements of remuneration: For variable elements of remuneration, the following principles shall also apply:

(a)

where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the business unit concerned and of the overall results of the CIF and when assessing individual performance, financial and non-financial criteria are taken into account;

(b)

the assessment of the performance is set in a multi-year framework in order to ensure that the assessment process is based on long-term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the underlying business cycle of the CIF and its business risks;

(c)

the total variable remuneration does not limit the ability of the CIF to strengthen its capital base;

(d)

guaranteed variable remuneration is not consistent with sound risk management or the pay-for-performance principle and shall not be a part of prospective remuneration plans;

(e)

guaranteed variable remuneration is exceptional, occurs only when hiring new staff and where the CIF has a sound and strong capital base and is limited to the first year of employment;

(f)

fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component;

(g)

CIFs must set the appropriate ratios between the fixed and the variable component of the total remuneration, whereby the following principles shall apply:

• the variable component shall not exceed 100 % of the fixed component of the total remuneration for each individual.
• Shareholders of the CIF may approve a higher maximum level of the ratio between the fixed and variable components of remuneration provided the overall level of the variable component shall not exceed 200 % of the fixed component of the total remuneration for each individual.

  Any approval of a higher ratio in accordance with point (g)(ii) must be carried out in accordance with the following procedure:

  • the shareholders must act upon a detailed recommendation by the CIF giving the reasons for, and the scope of, an approval sought, including the number of staff affected, their functions and the expected impact on the requirement to maintain a sound capital base;
  • shareholders must act by a majority of at least 66 % provided that at least 50 % of the shares or equivalent ownership rights are represented or, failing that, must act by a majority of 75 % of the ownership rights represented;
  • the CIF must notify all shareholders of the CIF, providing a reasonable notice period in advance, that an approval under the first subparagraph of this point will be sought;
  • the CIF must, without delay, inform the Commission of the recommendation to its shareholders, including the proposed higher maximum ratio and the reasons therefore and must be able to demonstrate to the Commission that the proposed higher ratio does not conflict with the CIF's obligations under this Directive and under Regulation (EU) No 575/2013, having regard in particular to the CIF's own funds obligations;
  • the CIF must, without delay, inform the Commission of the decisions taken by its shareholders, including any approved higher maximum ratio pursuant to point (g)(ii), and the Commission must use the information received to benchmark the practices of CIFs in that regard. The Commission shall provide the European Banking Authority ("EBA") with that information and EBA shall publish it on an aggregate home Member State basis in a common reporting format;
  • staff who are directly concerned by the higher maximum levels of variable remuneration referred to in point (g)(ii) of this paragraph must not, where applicable, be allowed to exercise, directly or indirectly, any voting rights they may have as shareholders;
• CIFs may apply the discount rate to a maximum of 25 % of total variable remuneration provided it is paid in instruments that are deferred for a period of not less than five years.

(h)

payments relating to the early termination of a contract reflect performance achieved over time and do not reward failure or misconduct;

(i)

remuneration packages relating to compensation or buy out from contracts in previous employment must align with the long-term interests of the CIF including retention, deferral, performance and clawback arrangements;

(j)

the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes an adjustment for all types of current and future risks and takes into account the cost of the capital and the liquidity required;

(k)

the allocation of the variable remuneration components within the CIF must also take into account all types of current and future risks;

(l)

a substantial portion, and in any event at least 50 %, of any variable remuneration must consist of a balance of the following:

• shares or equivalent ownership interests, subject to the legal structure of the CIF concerned or share- linked instruments or equivalent non-cash instruments, in the case of a non-listed CIF;
• (where possible, other instruments within the meaning of Article 52 ^[1] or 63 ^[2] of Regulation (EU) No 575/2013 or other instruments which can be fully converted to Common Equity Tier 1 instruments or written down, that in each case adequately reflect the credit quality of the CIF as a going concern and are appropriate to be used for the purposes of variable remuneration.

  The instruments referred to in this point must be subject to an appropriate retention policy designed to align incentives with the longer-term interests of the CIF. This point must be applied to both the portion of the variable remuneration component deferred in accordance with point (m) and the portion of the variable remuneration component not deferred;

(m)

a substantial portion, and in any event at least 40 %, of the variable remuneration component is deferred over a period which is not less than three to five years and is correctly aligned with the nature of the business, its risks and the activities of the member of staff in question.

Remuneration payable under deferral arrangements shall vest no faster than on a pro-rata basis. In the case of a variable remuneration component of a particularly high amount, at least 60 % of the amount shall be deferred. The length of the deferral period shall be established in accordance with the business cycle, the nature of the business, its risks and the activities of the member of staff in question;

(n)

the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the CIF as a whole, and justified on the basis of the performance of the CIF, the business unit and the individual concerned.

Without prejudice to the general principles of national contract and labour law, the total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the CIF occurs, taking into account both current remuneration and reductions in payouts of amounts previously earned, including through malus or clawback arrangements.

Up to 100 % of the total variable remuneration shall be subject to malus or clawback arrangements. CIFs must set specific criteria for the application of malus and clawback. Such criteria shall in particular cover situations where the staff member:

• participated in or was responsible for conduct which resulted in significant losses to the CIF;
• failed to meet appropriate standards of fitness and propriety;

(o)

the pension policy is in line with the business strategy, objectives, values and longterm interests of the CIF.

If the employee leaves the CIF before retirement, discretionary pension benefits shall be held by the CIF for a period of five years in the form of instruments referred to in point (l). Where an employee reaches retirement, discretionary pension benefits must be paid to the employee in the form of instruments referred to in point (l) subject to a five-year retention period;

(p)

staff members are required to undertake not to use personal hedging strategies or remuneration- and liability- related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;

(q)

variable remuneration is not paid through vehicles or methods that facilitate the noncompliance with this Directive or Regulation (EU) No 575/2013.

Our approach: Atonline Limited complies with all the requirements stated here above. In particular:

• In relation to points (a) and (b) hereabove, the performance appraisal process is geared in such a way as to force the discipline on the assessor to take into account the performance of the business unit and the Firm, in addition to the performance of the individual concerned and also to take into account qualitative factors such as punctuality and the number of justified complaints launched against the appraise. In addition, the appraisal process is set in a multi-year framework, currently spanning over the last three (3) years.
• In order to ensure that the principles of point (c) hereabove are met (the total variable remuneration does not limit the ability of the CIF to strengthen its capital base), the remuneration committee, which is entrusted with the duty of approving any variable remuneration component, is advised by the Head of the Risk Management Department, who is explicitly entrusted with the task, among others, of confirming that the total amount of proposed variable remuneration does not impede the ability of the CIF to strengthen its capital base.
• In relation to guaranteed variable remuneration (points (d) and (e) hereabove), it is indeed treated as exceptional, and it is subjected to approval by:
  • The General Manager or the Chief Operations / Financial Officer of the Firm, in case the proposed payment does not satisfy the Proportionality Conditions ^[3]
  • The Remuneration Committee, in cases where the Proportionality Conditions are satisfied. In such cases, an extraordinary meeting of the Remuneration Committee is called to deliberate on the matter. If the Remuneration Committee approves the payment of the sign-up bonus, the decision must be ratified by the Board of Directors.
• In relation to points (f) and (g) hereabove, the Firm adopts a two-branched approach, which on the one hand tries to ensure that the fixed element of remuneration is reasonable, thus reducing the possibility that members of staff will be induced to supplement their fixed salaries by resorting to extreme risk taking behavior in the hope of being rewarded with bonus payment, and on the other hand, sets indicative ratios of variable remuneration vs fixed remuneration. The salaries of members of staff (fixed remuneration) are reviewed at a bi-annual frequency, to ensure that they reflect any rise in the cost of living and that in general, they remain reasonable given the duties and responsibilities of each employee. In relation to the ratios of variable remuneration vis-Ё¤-vis fixed remuneration, they are well below the level of 100% stated in point (g)(i) hereabove, and thus it is very doubtful that the conditions of points (g)(ii) and (g)(iii) will ever be activated. The ratios of variable remuneration vis-Ё¤-vis fixed remuneration are subject to annual review to ensure that they are effective in relation to their intended purpose.
• In relation to points (l) (retained shares or other instruments), (m) (deferral) and (n) (performance adjustment) hereabove, based on the logic that such measures would be grossly disproportionate in relation to the payment of small bonus payments (which is usually our case), we introduced certain proportionality conditions for the application of these principles. The current proportionality conditions are:
  • The variable remuneration is more than thirty three percent (33%) of total remuneration , and
  • Total remuneration is more than six hundred thousand Euro (€600.000)

Remuneration Committee: CIFs which are significant in terms of their size, internal organisation and the nature, the scope and the complexity of their activities, must establish a remuneration committee.

The remuneration committee must be constituted in such a way as to enable it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk, capital and liquidity.

The remuneration committee must be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the CIF concerned and which are to be taken by the board of directors.

The Chair and the members of the remuneration committee must be members of the board of directors who do not perform any executive function in the CIF concerned. If employee representation on the board of directors is provided for by Cyprus law, the remuneration committee shall include one or more employee representatives. When preparing such decisions, the remuneration committee shall take into account the long-term interests of shareholders, investors and other stakeholders in the CIF and the public interest.

Our approach: The Firm has been adjudged by the Cyprus Securities and Exchange Commission to be a "significant CIF" and as such, it has established a Remuneration Committee, comprised of the Firm's non-executive directors. The Remuneration Committee is responsible for:

• setting the general principles of the Remuneration Policy and making proposals to the Board of Directors as to the actual remuneration of the persons that are subject to the Remuneration Policy.
• directly overseeing the remuneration of the senior officers in the risk management and compliance functions

When preparing such decisions and proposals to be addressed to the Board of Directors, the remuneration committee takes into account the long-term interests of shareholders, investors and other stakeholders in the investment firm.

Board of Directors: Members of the board of directors shall at all times be of sufficiently good repute and possess sufficient knowledge, skills and experience to perform their duties. The overall composition of the board of directors shall reflect an adequately broad range of experiences. Members of the board of directors shall fulfil the following requirements.

(a)

All members of the board of directors shall commit sufficient time to perform their functions in the CIF.

(b)

The number of directorships which may be held by a member of the board of directors at the same time shall take into account individual circumstances and the nature, scale and complexity of the CIF's activities. Unless representing the Republic, members of the board of directors of a CIF that is significant in terms of its size, internal organisation and the nature, the scope and the complexity of its activities shall not hold more than one of the following combinations of directorships at the same time:

• one executive directorship with two non-executive directorships;
• four non-executive directorships.

(c)

For the purposes of subsection (b), the following shall count as a single directorship:

• executive or non-executive directorships held within the same group;
• executive or non-executive directorships held within:
  • institutions which are members of the same institutional protection scheme provided that the conditions set out in Article 113, paragraph (7) of Regulation (EU) No 575/2013 are fulfilled; or
  • undertakings (including non-financial entities) in which the CIF holds a qualifying holding.

(d)

Directorships in organisations which do not pursue predominantly commercial objectives shall not count for the purposes of subsection (b).

(e)

The Commission may allow members of the board of director to hold one additional non-executive directorship. The Commission shall regularly inform the EBA of such authorisations.

(f)

The board of directors shall collectively possess adequate knowledge, skills and experience to be able to understand the CIF's activities, including the principal risks.

(g)

Each member of the board of directors shall act with honesty, integrity and independence of mind to effectively assess and challenge the decisions of the senior management where necessary and to effectively oversee and monitor the decision-making of the management.

Our approach: As a result of the introduction of these requirements in relation to the composition of the Board of Directors, the Firm has appointed one additional non-executive director with specialised knowledge and experience in the risk management sphere, bringing the number of non-executive directors to three. The number of non-executive directors exceeds the number of executive directors (two executive directors are appointed), giving the non-executive directors a controlling vote over the affairs of the Firm. The other two non-executive directors have a legal background.

In the case of one of the non-executives directors, the conditions of point (b) hereabove are not met. We are in consultation with the said director to address the issue.

Governance arrangements:

1. (a)

   The board of directors defines, oversees and is accountable for the implementation of the governance arrangements that ensure effective and prudent management of a CIF, including the segregation of duties in the organisation and the prevention of conflicts of interest.

   (b)

   The governance arrangements referred to here above, shall comply with the following principles:

   • the board of directors must have the overall responsibility for the CIF and approve and oversee the implementation of the CIF's strategic objectives, risk prevention strategy and internal governance,
   • the board of directors must ensure the integrity of the accounting and financial reporting systems, including financial and operational controls and compliance with the law and relevant standards,
   • the board of directors must oversee the process of disclosure and announcements,
   • the board of directors must be responsible for providing effective supervision of senior management,
   • the chairman of the board of directors of the CIF shall not exercise simultaneously the functions of a chief executive officer within the same CIF, unless justified by the CIF and approved by the Commission.

   (c)

   The board of directors shall monitor and periodically assess the effectiveness of the CIF's governance arrangements and shall take appropriate steps to address any deficiencies.

2. (a)

   A CIF which is significant in terms of its size, internal organisation and the nature, scope and complexity of its activities, shall establish a nomination committee composed of members of the board of directors who do not perform any executive function in the CIF.

   (b)

   The nomination committee shall:

   • identify and recommend, for the approval of the board of directors or for approval of the general meeting, candidates to fill vacancies in the board of directors, evaluate the balance of knowledge, skills, diversity and experience of the board of directors and prepare a description of the roles and capabilities for a particular appointment, and assess the time commitment expected;
   • decide on a target for the representation of the underrepresented gender in the board of directors and prepare a policy on how to increase the number of the underrepresented gender in the board of directors in order to meet that target. The target, policy and their implementation shall be made public in accordance with Article 435 paragraph 2, point c) of Regulation (EU) No 575/2013;

Our approach: The Board of Directors of the Firm complies in full with the duties and responsibilities assigned to it pursuant to paragraphs 1(a) and (c) here above, and observes in full the principles of paragraph (b). In this respect, the composition of the Board of Directors is of paramount significance. The executive directors of the Firm are the General Manager and the Chief Operations / Financial Officer, who are also the "four eye" persons responsible for the smooth and proper operations of the Firm. Due to their position, the executive directors are capable of monitoring all regulatory developments in the field of corporate governance, and in this way, it is ensured that the Board is fully appraised of all recent developments and the need to introduce new processes or amend existing processes, if such a need arises.

When it comes to the effective supervision of senior management (paragraph 1(b)(iv)), the Board of Directors meets at frequent intervals and the agenda of the meetings is structured in such a way so that the Board of Directors, and especially the non-executive directors, are fully appraised of and are given the opportunity to approve or reject all important matters related to the operations and the strategy of the Firm. In addition, the non-executive directors, who are entrusted with a controlling role, comprise all control committees (the remuneration committee, the nominations committee and the risk committee) and they also control the majority of votes and therefor have the upper hand in defining the outcome of the voting process.

In relation to paragraph 2, due to the fact that the Firm is deemed to be a "significant CIF", it has established a nomination committee comprised of the Firm's non-executive directors. The Firm has also put in place a recruitment policy for the selection of directors, which also incorporates the Firm's "Policy on Diversity". In particular, in relation to the target for the representation of the underrepresented gender, the Policy on Diversity provides that "in relation to gender, due to the fact that, as part of the recruitment policy principles, we have committed to an odd number of directors, the two genders cannot, by definition be equally represented on the Board. As a target though, we shall aim for the almost equal representation of the two genders, where the under-represented gender will not be represented by more than one (1) person less than the over-represented gender".

This principle has already been put into effect, since the Board of Directors is currently composed of three (3) female and two (2) male Directors.