ESMA has published the responses it received to its consultation on sound remuneration policies under AIFMD. The responses, including detailed submissions from the Alternative Investment Fund Management Association (AIMA), the Investment Management Association (IMA), the British Bankers' Association (BBA), the European Fund and Asset Management Association (EFAMA), the Managed Fund Association (MFA) and the City of  London Law Society (CLLS), make several significant criticisms of the draft guidelines, including:

  • that the draft is based on the guidelines applicable to banks, and does not focus on the specifics of the asset management sector;
  • that many firms will be subject to different sets of guidelines because of the breadth of their business, and the guidelines should be consistent. For this reason, a principles-based approach may be the most appropriate;
  • that the principle of proportionality is important and ESMA has not taken proper account of it;
  • that the guidelines should not apply to any staff who are not staff of the fund manager, such as staff of delegates;
  • that because of the nature of fund business, there may be new conflicts arising from the funds rather than from the firms, and ESMA should assess whether the perceived benefit of incentive alignment would outweigh the potential bias of a personal interest;
  • the risk that non-EEA entities will benefit over EEA entities because the guidelines apply globally to EEA entities;
  • the risk that the proposed guarantee structure will incentivise companies to hire externally rather than promoting internally; and
  • the restrictive description of carried interest used in the guidelines.

(Source: ESMA Publishes AIFMD Remuneration Responses)