Proportionality challenge: Esma consults on Ucits V remuneration

European Securities and Markets Authority (Esma) has launched a consultation on proposed Guidelines for remuneration policies under the Ucits V Directive and AIFMD, which are set to be implemented by member states as of March 2016.

While the legislation for Ucits V was published in the EU’s official journal in August last year, details on the definition of remuneration guidelines have been delegated to Esma.

The guidelines aim to ensure a convergent application of the remuneration provisions and to provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure.

One key challenge for Esma will be to define the meaning of the proportionality principle in the contact of Ucits, taking into account similar guidelines by the European Banking Authority and under AIFMD.

Esma chair Steven Maijoor comments on the launch of the consultation: “The consistent, common and uniform application of the UCITS Directive’s remuneration provisions will contribute to convergent supervisory approaches leading to a level-playing field in the fund sector and result in increased investor protection across the EU.

“These guidelines will encourage the implementation of sound and prudent remuneration policies and organisational requirements for UCITS, which will help in avoiding potential conflicts of interest and promote prudent risk-taking by fund managers.”

The consultation includes discussions on the definition of performance fees, application of different sectoral rules and possible exceptions to the remuneration rules.

Esma aims to close the consulation period during the first quarter of 2016 and ahead of the March 2016 deadline for implementation.

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