Proposed new rules for fund manager remuneration

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Earlier this year, the European Securities and Markets Authority (ESMA) published guidelines on the remuneration policies that managers of alternative investment funds (AIFMs) should implement to comply with the requirements of the Alternative Investment Fund Managers Directive (AIFMD). The guidelines introduce new standards for alternative investment managers, some of whom are not currently subject to any remuneration requirements.

BIPRU firms, including most hedge and debt fund managers, are in fact already subject to remuneration requirements set out in the Capital Requirements Directive (CRD) and the Financial Conduct Authority’s (FCA’s) Remuneration Code. AIFMD and ESMA’s AIFM remuneration guidelines are based on, but not identical to, the CRD provisions.

On 6 September, the FCA published its quarterly consultation paper, including proposed supplemental guidance (some of which will sit within the Systems and Controls Sourcebook and some of which will sit outside the handbook) to help firms interpret the ESMA guidelines. The proposed guidance deviates from the existing CRD/BIPRU Remuneration Code in two important aspects: it suggests hard financial thresholds for the application of proportionality to AIFM’s remuneration structures; and it deals specifically with remuneration through limited liability partnerships…

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