The FCA AIFMD Remuneration Code
Some of the most controversial provisions in the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (the AIFMD) relate to the provisions for controlling the way in which the staff of a manager (an AIFM) of an Alternative Investment Fund (AIF) (a term which encompasses all types of funds that are not regulated as UCITS, including hedge funds, private equity funds and real estate funds) can be remunerated.
In February 2013 the European Securities and Markets Authority (ESMA) published its finalised guidelines on the remuneration of alternative investment fund managers. These guidelines raised as many questions as they answered. This was followed by guidance in draft form from the FCA in the form of provisions within the FCA's quarterly Consultation Paper published on 6th September 2013. It is intended that the new draft guidance will be implemented early in 2014 by amending the FCA's Handbook at SYSC 19B which includes the FCA's AIFM Remuneration Code and associated guidance.
The FCA's draft guidance has generally been welcomed as sensible and pragmatic. It has provided answers on various questions raised by the Directive and by the ESMA Guidance.
It should be noted, however, that the FCA's guidance, once finalised, will act as a supplement to the ESMA guidelines, and does not replace the ESMA guidelines. This may lead to some uncertainty in applying sets of guidance, which are not always clearly expressed.
This briefing note provides an overview of how the AIFMD will apply to UK authorised AIFMs in the light of some of the important elements of this new guidance and its implications for AIFMs.