On October 14th 2016, the European Securities and Markets Authority (ESMA) published two sets of guidelines on sound remuneration policies under Directive 2009/65/EC of 13 July 2009 as amended by Directive 2014/91/EU of 23 July 2014 (the “UCITS Directive”) and under Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers (the “AIFMD”) (the “UCITS Guidelines” and “AIFMD Guidelines”).

The UCITS and AIFMD Guidelines have remained identical to the guidelines included in the ESMA final report on sound remuneration policies under the UCITS Directive and the AIFMD which was published on March 31st 2016 (we refer you to our previous article). As mentioned therein, ESMA did not integrate in the final report the guidance included in the draft version of the UCITS Guidelines with regard to the possibility to waive certain provisions under the UCITS Directive on the basis of the proportionality principle. Such provisions referred mainly to the pay-out-process (i.e. the requirements on variable remuneration on instruments, retention, deferral and ex-post incorporation of risk for variable remuneration).

However, ESMA published on March 31st 2016 a letter addressed to the European legislators, calling them to provide clarity on the application of the proportionality principle, mainly in relation to its application on the pay-out process, in view of ensuring the consistent application of the remuneration requirements in the asset management sector.

It appears from the final UCITS Guidelines that despite the publication of this letter, no amendment has been done to the UCITS Guidelines for the purposes of clarifying the conditions under which it is permitted to waive the requirements relating to the pay-out process.

National Competent Authorities (NCAs) were required to notify ESMA as to whether they comply or intend to comply with the finalised Guidelines, or to provide their reasons for non-compliance, by December 15th 2016. ESMA will publish a compliance table based on the responses received from the NCAs.

The UCITS and AIFMD Guidelines apply from January 1st 2017. However, with regard to the UCITS Guidelines, the guidance on the rules on variable remuneration should first apply to variable remuneration in relation to the first full performance period after January 1st 2017. ESMA thus underlines that a management company whose accounting period ends on December 31st should apply the guidelines on the rules on variable remuneration to the calculation of payments relating to the 2017 accounting period.