The Prudential Regulation Authority, the Remuneration Code and clawback
By Barbara Allen and Kiersten Lucas
On 13 March 2014, the Prudential Regulation Authority (PRA) issued a consultation on its proposals to extend the scope of the Remuneration Code to apply clawback to vested variable remuneration on a group-wide basis.
All firms authorised by the PRA will be required to amend employment contracts to provide employers with a right to clawback vested variable remuneration, including bonus awards. Clawback is to apply for up to six years following vesting.
In line with the existing Remuneration Code requirements on malus, clawback should apply when: there is reasonable evidence of employee misbehaviour or material error; the firm or the relevant business unit suffers a material downturn in its financial performance; or the firm or the relevant business unit suffers a material failure of risk management…
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