Remuneration Rules: EU Commission Report for Credit Institutions and Investment Firms
The EU Commission published its report (under the Capital Requirements regime) on the Remuneration Rules for Credit Institutions and Investment Firms. The EU Commission found that the remuneration rules are generally effective in curbing the excessive risk-taking behaviour and short-termism they were intended to address. The report finds that
- Some of the rules may be too costly and burdensome to apply. This is particularly the case when the rules on deferral and pay-out in instruments are applied to small and non-complex institutions or to staff with low levels of variable remuneration, and when listed institutions are required to use shares to remunerate their staff.
- In the context of the impact of the rules on UCITS and AIF managers which form part of a CRD-regulated group (where compliance with the rules would disadvantage them as against independent UCITS and AIF managers), the report notes that staff of UCITS and AIF manager subsidiaries need to comply with CRD rules only to the extent that they are identified as having a material impact on the risk profile of the group.
The EU Commission will carry out an impact assessment, on the basis of which it may propose adjustments to the remuneration rules. This work will be part of the broader revision of the CRD and CRR planned for the end of this year.
The EU Commission will also examine the implications of the report for UCITS V and AIFMD remuneration rules. This will hopefully clarify the application of the proportionality principle and cross sectoral alignment as requested by ESMA in its letter to the Commission of 31 March 2016 which was discussed in our April Front Page.
IOSCO consultation on good practices for the termination of investment funds
The International Organization of Securities Commissions (IOSCO) published a consultation report on good practices for the termination of investment funds. IOSCO does not intend that the finalised good practices will override national or regional legal or regulatory requirements, or insolvency regimes. Moreover, not all of the good practices are expected to apply in all circumstances. The consultation closes on 17 October 2016. The 15 good practices for the termination of investment funds on which IOSCO is consulting in the report are categorised under the following headings.
- Disclosure at time of investment.
- Decision to terminate.
- Decision to merge.
- During the termination process, and
- Specific types of investment funds.
The List of Good practices is set out in Appendix 2.
IOSCO report on good practice for fees and expenses of collective investment schemes
IOSCO published a final report on good practice for fees and expenses of collective investment schemes (CIS). The report aims to identify common international examples of good practice that can be applied to CIS fees and expenses. The report is aimed at retail CIS. In the report, IOSCO sets out 23 examples of good practice relating to issues including:
- permitted or prohibited costs for a CIS;
- disclosure of fees and expenses to the investor, including use of electronic media;
- remuneration of the CIS operator;
- performance-related fees;
- transaction costs;
- hard and soft commissions on transactions;
- fees associated with CIS that invest in other funds;
- fee differentiation in multi-class CIS; and
- changes to the fees and expenses of a CIS.
Anti - Money Laundering/Countering the Financing of Terror
The Counter-Terrorism Financing Summit 2016brought together leaders and experts in counter terrorism financing and financial intelligence from around the world to begin the process of developing regional solutions to terrorism financing issues and risks. Australia’s financial intelligence agency (AUSTRAC) and its Indonesian counterpart financial intelligence unit, Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), issued the Regional Risk Assessment on Terrorism Financing 2016. The regional risk assessment identifies primary terrorism financing risks from across a broad spectrum of assessed risks. One of the key requirements of the FATF Recommendations is for countries, to identify, assess and understand the money laundering and terrorist financing risks that they are exposed to. Once these risks are properly understood, countries will be able to implement measures that mitigate these risks.