Limited licence/limited activity firms subject to the requirements of the Capital Requirements Directive (CRD IV) will have received email correspondence from the FCA requesting information in relation to their high earners in 2013. This information has not previously been collected by the FCA from such firms and we have received a number of queries as to why this is now being requested, and whether firms are required to comply by the 10 November deadline.
- Limited licence/limited activity firms will have received a request from the FCA to complete a high earners report in respect of 2013
- Although compliance in respect of 2013 is being requested on a voluntary basis, the FCA expects firms to comply wherever practicable
- The deadline for submission is 10 November 2014
- The submission must give details of employees earning £832,150 (€1,000,000) or more, and must be made using the published template
- These reporting requirements do not apply to BIPRU firms
1. Why this now applies to limited licence/limited activity firms
Information on the remuneration of individuals receiving annual remuneration of €1m or more is currently collected by the FCA from full-scope IFPRU firms in order that this can be included in the FCA’s annual submission to the European Banking Authority (EBA). The FCA has previously excluded from this requirement limited licence/limited activity IFPRU firms (see SUP 16.17.4R in the FCA Handbook), unless those firms form part of a consolidation group headed by a full-scope IFPRU firm. This is because those firms were not required to provide this information under the equivalent CRD III provisions.
The revised provisions of CRD IV, which came into force on 1 January 2014, bring limited licence/limited activity IFPRU firms into the scope of the data collection provisions. Notwithstanding that such firms would not, therefore, have been subject to the data collection provisions during 2013, the EBA is requesting 2013 remuneration information from such firms on the basis that the CRD IV provisions now apply to them.
2. Application to limited licence/limited activity firms: what action is required
Although, ordinarily, a firm is required to provide remuneration information in relation to its financial year within four months following the end of that financial year, as the FCA was not anticipating collecting information from limited licence/limited activity IFPRU firms in relation to 2013, the deadline has been extended to 10 November 2014. This deadline has been set in order that the FCA is able to collate the information and submit it to the EBA by the end of November.
Whilst the CRD IV provisions came into force on 1 January 2014, the Directive does not apply directly in the UK without formal implementation. Whilst the provisions of SUP 16.17.4R will not be amended by the FCA until after the 10 November deadline, and so firms are not technically bound to provide the information to the FCA, the FCA has requested that firms provide this information on a voluntary basis and has indicated that it would expect firms to comply wherever practicable.
3. How to submit a high earners report
The FCA has provided firms with a template (in Excel format) which needs to be completed and submitted via email firstname.lastname@example.org. This template follows the new format requested by the EBA and requires remuneration information to be split between business areas (although many of these will not be relevant for limited licence/limited activity IFPRU firms) and type of remuneration (i.e. fixed, variable and deferred amounts). A new page is required for each remuneration band (i.e. €1m+, €1-2m, €2-3m etc).
In order to convert remuneration paid in GBP to EUR, the exchange rate 1 GBP = 1.20170642312 EUR is used (being the European Commission financial programming and budget exchange rate for December 2013 – the exchange rate for December of the relevant reporting year is always used in order to ensure reporting consistency).
All information is provided on an anonymised and aggregated basis. Indeed, the information then provided by the FCA to the EBA is further aggregated and only published by the EBA on a country-by-country basis without reference to individual firms.
Any firm which does not have any employees earning above €1m should submit a nil return.
4. Compliance on a group basis
Although the FCA has sent its request to all limited licence/limited activity IFPRU firms, where there is more than one such firm within a consolidation group, only one spreadsheet needs to be completed by the lead firm, in relation to all entities within the group. In this case, however, the requirement to submit information is not limited only to IFPRU firms within the group, but will need to include high earners throughout the group.
5. Compliance in 2014 and subsequently
In relation to future returns, the firm making the return will need to submit information in the form of the revised template which will replace that annexed to SUP 16 in the FCA Handbook. For those firms with a calendar financial year, the next return (in relation to 2014 remuneration) will need to be submitted by the end of April 2015.
6. BIPRU firms are not affected
Finally, limited licence/limited activity firms which varied their permissions in order to remain as BIPRU firms (and therefore not subject to CRD IV) are outside the scope of the remuneration data collection provisions and are not required to provide any such information to the FCA.