Financial Services Regulatory Update — 7 February 2014

Following its September 2013 consultation (CP13/9), the Financial Conduct Authority (FCA) has published finalised guidance on the Alternative Investment Fund Managers Directive (AIFMD) remuneration code. The guidance is linked, where appropriate, from the remuneration code to the FCA Handbook (SYSC 19B). The guidance is aimed at firms authorised as full-scope alternative investment fund managers (AIFMs) and came into effect on 31 January 2014. Chapter 3 of the FCA’s Handbook Notice No. 8 contains the consultation feedback.

Among other things, the FCA considers that firms should apply the AIFMD remuneration regime to the first full performance period after the firm becomes authorised.

It also considers how proportionality will be applied to AIFMs and to certain individuals remuneration structures. In particular, the proportionality size threshold under which there is a working assumption that it is appropriate to dis-apply the Pay-out Process Rules is set at: (a) £5bn for AIFMs that manage portfolios of alternative investment funds (AIFs) that are unleveraged and have no redemption rights for five years from initial investment; and (b) £1bn for AIFMs that manage portfolios of AIFs in other cases, including any assets acquired through the use of leverage. The Pay-out Process Rules are those relating to retained units, shares or other instruments; deferral; and performance adjustment…

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