On 11 June 2013, following a consultation paper in September 2012 (the “Consultation Paper”) and advice received from the Securities and Markets Stakeholder Group (the “SMSG”) (together the “Feedback”), the European Securities and Markets Authority (“ESMA”) issued its final report (the “Report”) on its guidelines on the remuneration policies and procedures under the markets in financial instruments directive (“MiFID”) (the “Guidelines”).

The Feedback highlighted the following key issues:

  • The ratio between fixed and variable remuneration;
  • Proportionality;
  • Consistency with other remuneration guidelines and initiatives;
  • Outsourcing;
  • The use of the term “relevant persons”;
  • Overlap with ESMA’s compliance function guidelines; and
  • Transitional requirements and deadlines.

Ratio between fixed and variable remuneration

On this issue, the Feedback highlighted that the ratio between fixed and variable remuneration should not be fixed by the Guidelines. ESMA notes that the Guidelines do not propose the fixing of this ratio and that it does not consider variable remuneration to give rise to any conduct issues provided the relevant individuals act in the best interests of the client at all times. However, the Report notes that where the assessment of performance, hen determining variable remuneration, is measured on the basis of sales volume, this can lead to conflicts of interest which may ultimately result in detriment to the client. ESMA has now made it clear in Annex I that, where remuneration is based on the volume of sales, an investment firm’s remuneration policy and practice should define the criteria, to include qualitative elements, to be considered when assessing the performance of an individual.


The Report confirms that the Guidelines have been drafted with the principle of proportionality in mind and, accordingly, investment firms should take into account the nature, scale and complexity of their businesses and the services they provide when applying the Guidelines.

Consistency with other remuneration guidelines and initiatives

Some respondents to the Consultation Paper suggested that ESMA issue all of its remuneration guidelines in a single consolidated document, to include its guidelines in respect of the Alternative Investment Fund Managers Directive and the Committee of European Banking Supervisors guidelines. However, the Report confirms that ESMA believes the context of each set of guidelines is different and that the overall effect is complementary as opposed to conflicting.


Responses to the Consultation Paper raised the issue of whether remuneration can apply to outsourcing that an investment firm might engage in. The Report outlines that ESMA’s opinion is that when outsourcing the provision of any investment services, investment firms must ensure that such outsourcing is in the best interest of clients and that an attempt to circumvent the MiFID rules is not intended. Investment firms should query whether the remuneration policies and practices utilised by outsourced firms are consistent with the Guidelines.

Use of the term “relevant persons”

When considering the Guidelines, some respondents to the Consultation Paper noted that the definition for “relevant persons” included in the Guidelines differs from that provided in MiFID. While ESMA notes the potential for confusion here the definition will remain unchanged for the purposes of the Guidelines. However, an explanation has now been included in Annex I.

Overlap with the MiFID compliance function guidelines

The Final Report notes that some respondents to the Consultation Paper commented on the fact that there appears to be some overlap between the Guidelines and other policy documents issued by ESMA such as the compliance function guidelines. While this may be the case, ESMA believes that provided there is no contradiction between the various guidelines and appropriate cross referencing is included, this should not present an issue.

Transitional requirements and deadlines

The Final Report confirms that the transitional requirements and deadlines currently in place for the implementation of the Guidelines will remain unchanged. This is due to the fact that (i) the MiFID rules are already in place, (ii) investment firms should already be demonstration compliance with MiFID, and (iii) the Guidelines are high level and generic in nature.

Following the translation of the Guidelines into the official languages of the European Union, the Guidelines will be published on ESMA’s website. Following that publication, competent authorities have two months to notify ESMA whether they comply or intend to comply with the Guidelines. Where a competent authority is not in compliance, the reasons for such noncompliance must be provided.