The various EU legislative regimes all set specific remuneration requirements on AIFMs, UCITS management companies and investment firms. The remuneration requirements under the IFR/IFD will enter into force on 26 June 2021. These include the requirement to identify categories of staff whose professional activities have a material impact on an investment firm’s risk profile or assets it manages, the possible alternatives arrangements that are appropriate to be used for the purposes of variable remuneration, and guidelines on sound remuneration policies.
The AIFMD and UCITS Directive also impose various remuneration requirements, links to which can be found in the Official Texts on EU Remuneration section below.
IFR/IFD remuneration requirements, effective as of 26 June 2021, will apply to the remuneration year commencing January 2022.
The European Securities and Markets Authority (ESMA) has launched a consultation on its draft guidelines on certain aspects of the MiFID II remuneration requirements (i.e., Articles 9(3), 16(3), 23 and 24 of MiFID II and Articles 27 and 34 of the MiFID II Delegated Regulation). The purpose of the draft guidelines is to enhance clarity and foster convergence in the implementation of certain aspects of the new MiFID II remuneration requirements, replacing the existing ESMA guidelines on the same topic, issued in 2013. The guidelines have been reorganised and divided in the following sections: (i) design of remuneration policies and practices; (ii) governance; (iii) controlling risks that remuneration policies and practices create.
The draft ESMA guidelines would apply to all investment firms, including small, non-interconnected (‘SNI’) investment firms under IFR/D who will not be subject to the EBA’s draft guidelines on sound remuneration policies under IFD. The draft ESMA guidelines would also apply to external AIFMs and UCITS management companies to the extent they are authorised to perform services under Article 6(4) of the AIFMD or Article 6(3) of the UCITS Directive, respectively.
Comments are due to be submitted by no later than 19 October 2021. ESMA will consider the responses received and is expected to publish a final report, and final guidelines, by end of Q1 2022.
Please contact Remmert Keijzer if you have any questions or would like to contribute to a response.
The EBA consulted on their draft guidelines on sound remuneration policies under the IFD earlier this year. They are expected to publish their final guidelines in the near future.
(Last updated: 20 July 2021)