The European Securities and Markets Authority (ESMA) has published its final Remuneration Guidelines for UCITS managers.

The final guidelines do not materially differ in most respects from the draft guidelines published for consultation last year. However, ESMA has declined to opine on one of the most eagerly awaited aspects of the new regime. Firms were looking forward to ESMA giving guidance on where proportionality would allow scaling back or complete disapplication of certain provisions, particularly on the pay-out rules principally involving deferral of bonuses and payment in fund instruments. 

In a similar way to the problems facing the EBA in interpreting CRDIV, ESMA is uncertain as to whether the underlying legislation allows complete disapplication or neutralisation and to what extent it can reduce certain obligations. It has therefore sought legal advice on these issues and given very little guidance in these guidelines.  

Subject to that though, it gives some indication of what it would like to happen. It proposes to allow smaller fund managers in terms of complexity, activity, internal organisation, balance sheet or assets under management to disapply certain pay-out rules e.g. paying in fund units and deferral.   

However, final answers on these questions will take some time. While ESMA has confirmed that it is only variable remuneration earned on or after 1 January 2017 that will be affected by the new rules, whether satisfactory answers can be obtained in time from the European and UK authorities remains to be seen and so the period of uncertainty for fund managers looking to take advantage of proportionality will continue.