CP12/32: Implementation of the Alternative ... - BVCA admin

CP12/32
Implementation of the Alternative Investment Fund Managers Directive
Annex X
7.67 AIFMs will be required to have remuneration policies that promote effective risk
management, while at the same time allowing risk-taking commensurate with each AIF’s
investment objectives. 87 These remuneration policies will need to apply to staff whose
professional activities have a material impact on the risk profiles of the AIFM or the AIFs
under management. These staff categories will include senior management, risk takers,
control functions and any employees who receive total remuneration, taking them into the
same remuneration bracket as senior management and risk takers. 88
7.68 AIFM remuneration policies will need to cover elements such as:
• performance-related pay;
• guaranteed variable remuneration;
• balance between fixed and variable components of total remuneration;
• remuneration in the form of units and shares in the AIFs under management;
• a mandatory deferral period of at least three to five years, unless the life cycle of the
AIF is shorter; and
• clawback of remuneration for under-performance.
Proportionality
7.69 The Directive states that the remuneration principles will apply to AIFMs ‘in a way and to
the extent that is appropriate to their size, internal organisation and the nature, scope and
complexity of their activities’.
7.70 Several respondents to DP12/1 asked how proportionality would apply to an AIFM’s
remuneration policy, and whether there would be differences with the proportionality
framework in our existing Remuneration Code. 89 In certain circumstances AIFMs may be
subject to both AIFMD and the Remuneration Code. Respondents to DP12/1 identified this
potential overlap as an area of concern because of the likelihood of increased
administrative burdens and the difficulties of adopting a group-wide policy that complies
with both regimes insofar as they may diverge.
7.71 The extent to which proportionality may be applied to an AIFM’s remuneration policies is
still being considered by ESMA. Once the ESMA guidelines are finalised, we intend to
establish a proportionality framework specific to firms within the scope of AIFMD,
incorporating European requirements and guidelines. The framework for AIFMs will take
account of the Remuneration Code in SYSC 19A, but is likely to differ from it in structure.
87 SYSC 19B.1.2R. See Article 13(1) AIFMD.
88 SYSC 19B.1.3R. See Article 13(1) AIFMD.
89 Question 9 of DP12/1.
60 Financial Services Authority November 2012