ESMA opens consultation on remuneration guidelines for alternative managers

The European Securities and Markets Authority (ESMA) has published a consultation paper on proposed guidelines on the remuneration of alternative investment fund managers (AIFMs).

Guidelines will apply to managers of alternative investment funds including hedge funds, private equity funds and real estate funds.

These funds will be asked to introduce sound and prudent remuneration policies and structures with the aim of increasing investor protection and avoiding conflicts of interest that may lead to excessive risk taking.

The Alternative Investment Fund Managers Directive established a set of rules that alternative managers have to comply in applying a remuneration policy for certain categories of their staff, and required ESMA to develop guidelines on sound remuneration policies to further clarify the Directive’s provisions.

According to the guidelines proposed in the paper, the governing body of each AIFM will have to ensure sound and prudent remuneration policies and structures exist and fund managers will have to select the type of staff for which a remuneration policy is put in place and disclose according to which criteria the staff was selected.

“The proposed remuneration guidelines for alternative investment funds are an important step in creating a single EU rulebook by ensuring the consistent application of the AIFMD remuneration requirements across member states,” said Steven Maijoor (pictured), chair of ESMA.

He added: “Given our co-operation with the European Banking Authority on remuneration principles, we expect that the future guidelines will ensure consistency of the rules for remuneration across financial sectors. This consistency will help strengthen the protection of investors and avoid the creation of adverse incentives for those managing alternative investment funds.”

The consultation runs until September 27 and ESMA aims to publish a final report before the end of 2012. The transposition deadline for the directive if July 22, 2013.

Click here to access the consultation paper.

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