Ireland: ESMA Proposes AIFMD Alignment In Consultation On UCITS V Remuneration Rules


On 23 July 2015, the European Securities and Markets Authority ("ESMA") issued a consultation paper and draft guidelines (the "Consultation Paper" and "Draft Guidelines"1) in relation to the remuneration provisions of the UCITS V Directive2.

You can access the Consultation Paper/Draft Guidelines here.

In a move that will be welcomed by the funds industry and particularly by operators of both UCITS and alternative investment funds ("AIFs"), the Draft Guidelines are broadly aligned with the ESMA Guidelines on Sound Remuneration Policies under AIFMD (the "AIFMD Guidelines").

Key aspects

Set out below is a brief overview of some key aspects of the Consultation Paper and Draft Guidelines.

(i) Proportionality

ESMA states in the Consultation Paper that, consistent with its mandate in the UCITS V Directive, its aim in developing the Draft Guidelines has been to take the AIFMD Guidelines as its starting point and depart from them only if and when necessary.

Reference is made to a consultation paper3 issued by the European Banking Authority (the "EBA") in, the context of CRD IV4. This EBA consultation paper considered that proportionality could not be relied upon to disapply the remuneration rules. However, in ESMA's view a different approach can be taken in a UCITS context. This is based on the mandate to align the guidelines with AIFMD and also on a precise consideration by ESMA of the key provisions in the UCITS legislation on this point. In further justifying a different approach, ESMA notes that the EBA position relates to a different sector of the financial services industry.

Accordingly, ESMA considers that there is scope to interpret the UCITS legislation so as to permit the disapplication of remuneration rules on the basis of proportionality in certain circumstances.

This relates specifically to "pay-out process" rules due to be introduced under UCITS V. These rules require that key staff receive at least 50% of their bonus in fund shares and also defer at least 40% of their bonus for a period of at least three years.

The Draft Guidelines, if finalised in current form, would enable entities (that meet certain criteria) to fully disapply these pay-out process rules on the grounds of proportionality, in a manner similar to that prescribed under the AIFMD Guidelines.

However, in the Consultation Paper, ESMA specifically asks5 responding managers to indicate if they would have difficulties if ESMA took the contrary position, in line with the EBA, and did not permit a disapplication of the remuneration rules on the grounds of proportionality. Fund managers should therefore not consider this point to be fully closed and are urged to respond to the consultation in support of the current proposals.  

(ii) Delegation

In the Consultation Paper/Draft Guidelines, ESMA has adhered closely to the AIFMD Guidelines in relation to delegates performing investment management activities. Therefore the remuneration rules can be disapplied for such delegates that are subject to regulatory requirements on remuneration that are "equally as effective" as those under UCITS V. Otherwise the relevant remuneration rules must be applied to such delegates under contract.

Continuing from the approach outlined in the ESMA Q&A on AIFMD6, the Draft Guidelines expressly state that entities that are subject to remuneration rules under AIFMD or CRD IV7 will be deemed automatically to meet this "equally as effective" test.

(iii) Pro-rata application to persons with split functions

The Draft Guidelines provide for remuneration rules to apply on a pro rata basis where a person performs multiple services subject to different remuneration regimes.

(iv) Bonus in fund shares – test on a per fund basis

A significant clarification is made by ESMA regarding the requirement to pay at least 50% of variable remuneration in shares of the relevant UCITS (or equivalent instruments / instruments with equally effective incentives) where the UCITS represents more than 50% of the relevant management company's assets under management.

ESMA considers this should be assessed on an individual fund basis, rather than on the aggregate level of UCITS assets as a percentage of total assets under management. Therefore the bonus in fund shares rule will only apply to a management company if it manages a single UCITS that represents more than 50% of its total asset under management. For managers running large scale UCITS but across a diversified range of funds, this is a very positive clarification and should facilitate disapplication of one of the key pay-out process rules.

(v) Group companies

A group company provision is included in the Draft Guidelines (and will also be carried into the AIFMD Guidelines). This provides that a regulator of another entity within a group could deem other remuneration rules (for example, under CRD IV) to apply to staff of the relevant UCITS management company/AIFM as identified staff of the connected group entity.

Consultation invites feedback

ESMA invites public or confidential responses - to be received on or before 23 October 2015. Finalised guidelines are then expected to issue in Q1 2016, ahead of the transposition deadline for UCITS V (18 March 2016). It is expected the guidelines will then apply to UCITS management companies in respect of the next full financial year/remuneration period that starts after that date.


1 ESMA Consultation Paper (2015/ESMA/1172): Guidelines on sound remuneration policies under the UCITS Directive and AIFMD

2 Directive 2014/91/EU

3 Consultation paper on draft guidelines on sound remuneration policies (EBA/CP/2015/03).

4 Capital Requirements Directive 2013/36/EU

5 In Question 1.a

6 ESMA Questions and Answers (ESMA/2015/1137): Application of the AIFMD

7 Although it is noted that ESMA's AIFMD Q&A refers to CRD rather than CRD IV

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Peter Stapleton
Stephen Carty
Ian Conlon
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions