The UK Financial Services Authority (“FSA”) has recently announced a delay to the anticipated publication date for its policy statement (“PS”) and final rules on revising its Remuneration Code (“Code”). The PS and the final Code were due to be published in mid-November 2010, but will now be published in mid-December 2010 – giving firms only three weeks to put the Code into effect. (For more information on the FSA’s consultation on changes to the Code, please refer to our earlier Client Alert.)


The FSA’s announcement was made at the end of last week by e-mail to some of the UK’s trade associations (including the Alternative Investment Management Association). In the announcement, the FSA states that it has decided to delay the final version of the PS and the Code in order to be able to take full account of the final guidelines to be published by the Committee of European Banking Supervisors (“CEBS”). It is anticipated that the PS and the final Code will now be published on or around 11 December 2010. (For further information on the CEBS guidelines, please refer to our Client Alert.)

The FSA has announced: “Given the position reached in this process, we are not able to publish the PS in mid-November, when the CEBS guidelines will still be subject to consultation. We have therefore decided to publish the PS in mid-December, after the expected CEBS publication date. This will allow us to set rules and guidance with reference to CEBS final guidelines”.


The FSA goes on to confirm that it is aware of the timing issues for firms arising from this revision to the implementation timetable, particularly the uncertainty about Principle 12 of the Code (the proposed rules on remuneration structures, which require deferral, share-based payment and performance adjustment). These are the specific requirements which the FSA suggested in their previous consultation paper could be implemented on a "comply or explain" basis, using the principle of proportionality derived from CRD III (as expanded upon in CEBS’s draft guidelines). Unfortunately, this announcement leaves even greater uncertainty than already existed although the FSA announcement has stated, “We hope to be able to provide more information on our approach to proportionality for the Code in about three weeks' time”.

Timing implications

Firms that are within the scope of the Code will still be required by the FSA to comply in full with the revised Code from 1 January 2011. Although the FSA has stated that the areas of outstanding uncertainty are focused largely on certain elements of remuneration structures, and that it is likely that the final draft of the PS and the Code will be on broadly similar lines to those proposed in the previous consultation paper, the current position is that firms will find it extremely difficult to draft a sensible and relevant remuneration policy without knowing what the final Code will specifically require.

What firms will find even more difficult is the fact that, given the 1 January 2011 implementation date, they will effectively only have three weeks to put the Code into effect after the final PS and Code are published, all of which cover the three-week period at the end of the year. The timetable is now:

8 November 2010: CEBS consultation period closes Late-November 2010: FSA anticipates publishing further information on proportionality 11/12 December 2010: CEBS final guidelines published Mid-December 2010: PS and final Code published 1 January 2011: Code comes into force

Recommended Action

The FSA’s timetable for the new remuneration rules presents a major challenge. As we mentioned in our previous client alert, FSA regulated fund managers should ensure that they begin the process of reviewing their remuneration policies, procedures, employment contracts etc as soon as possible so that the compliance officer and relevant directors/members etc are fully familiar with them before the final Code is published. It would also be worthwhile for firms to ensure that these key personnel are available to make appropriate policy decisions on remuneration in the three-week period at the end of the year to ensure that any necessary amendments can be made before 1 January 2011.