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Regulatory Update: ESMA Publishes UCITS Remuneration Guidelines

31 March 2016

The European Securities and Markets Authority (ESMA) has today published its final Guidelines on sound remuneration policies under the UCITS Directive and AIFMD. ESMA has also written to the European Commission, European Council and European Parliament on the proportionality principle and remuneration rules in the financial sector.

The UCITS Remuneration Guidelines provide clarity on the requirements under the UCITS Directive for management companies when establishing and applying a remuneration policy for key staff. The Guidelines will ensure a convergent application of these provisions and provide guidance on the governance of remuneration, requirements on risk alignment and disclosure. The Guidelines will apply to UCITS management companies and national competent authorities from 1 January 2017.

ESMA has decided to follow an approach which is similar to that adopted by the EBA and did not include in the final UCITS Remuneration Guidelines any guidance on the possibility not to apply certain specific requirements on the pay-out process set out in the UCITS Directive. ESMA has also written to the European institutions suggesting that further legal clarity could be beneficial to all the interested parties.

AIFMD Remuneration Guidelines
The amended AIFMD guidelines will come into force on 1 January 2017. The amendment to the AIFMD guidelines relates to the section of these guidelines dealing with the application of the remuneration rules in a group context and is intended to acknowledge the potential outreach of the CRD rules in a banking group.

The current AIFMD Guidelines will not be amended to bring them into line with the UCITS Guidelines pending clarification on the application of the proportionality principle.

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