Earlier this month the Financial Conduct Authority (FCA) published its Quarterly Consultation Paper (CP13/9) which includes consultation on draft amendments to its Alternative Investment Fund Managers (AIFM) Remuneration Code and draft guidance clarifying when it would be disproportionate for an authorised AIFM to comply with certain aspects of the Code, given the nature, scale and complexity of its activities.
The proposed changes and draft guidance should be of interest to all UK authorised hedge fund and private equity fund managers. The consultation closes on 6 November 2013, with final guidance expected in early 2014.
The current AIFM Remuneration Code is set out in Chapter 19B of the Senior Management Arrangements, Systems and Controls sourcebook (SYSC). SYSC 19B requires AIFMs to implement and maintain remuneration policies and practices for certain categories of staff whose professional activities have a material impact on the risk profiles of AIFMs. Such staff include senior management, risk takers and those performing controlled functions. It also includes employees whose total remuneration takes them into the same pay bracket as senior management and risk takers.
SYSC 19B sets out certain high level principles on the governance of remuneration and alignment of staff incentives with sound and effective risk management and risk taking. It restricts the use of golden hellos and retention bonuses. It also prescribes rules on the structure of pay for certain senior managers and risk takers, in particular in relation to variable remuneration. The current consultation includes proposed amendments to these rules to make them less onerous on AIFMs. The FCA has also provided draft guidance on when authorised AIFMs should implement the AIFM Remuneration Code and greater clarity on the concept of proportionality and Code compliance.
For further information regarding the AIFM Remuneration Code and the proposed changes and draft guidance currently under consultation, please contact either Nick Thorpe or Neil Johnston, who are both updating authors of the financial services section of XpertHR's Employment Manual.
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