On 23 July 2015 the European Securities and Markets Authority ("ESMA") launched a consultation on proposed guidelines on remuneration under the UCITS V Directive. UCITS V requires UCITS management companies and self-managed investment companies to adopt remuneration policies and practices that are consistent with and promote sound and effective risk management and discourage disproportionate risk taking. The consultation paper sets out ESMA's formal proposals for guidelines on the remuneration policies required by UCITS V ("UCITS Remuneration Guidelines"). The UCITS Remuneration Guidelines aim to provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure. The consultation paper also proposes a revision of the 'Guidelines on sound remuneration policies under AIFMD ("AIFMD Remuneration Guidelines"), published on 3 July 2013.


ESMA has proposed in its consultation paper that the principle of proportionality under the UCITS Remuneration Guidelines should be aligned with the AIFMD Remuneration Guidelines. This approach is very significant as we know that ESMA considered a much narrower interpretation of the principle of proportionality along the lines recently suggested by the European Banking Authority on equivalent rules under CRD IV1. This would have meant that the proportionality principle could not be used to disapply any of the so-called 'payout process' rules (such as requiring at least 50% of any variable remuneration to be in the form of units of the UCITS and at least 40% of any variable remuneration being deferred over an appropriate period).

If the final UCITS Remuneration Guidelines adopted by ESMA reflect an alignment with AIFMD, this is a very welcome development.


The deadline for submission of comments to ESMA is 23 October 2015. ESMA will consider the feedback it receives with a view to finalising the UCITS Remuneration Guidelines and publishing a final report by early Q1 2016, ahead of the transposition deadline for UCITS V (i.e. 18 March 2016).

We continue to analyse the detail of the consultation paper and will be issuing further updates shortly. We will also be submitting a response to ESMA on this consultation paper.


 1. The European Banking Authority's view, in its recent Consultation Paper on Draft Guidelines on Sound Remuneration Policies under CRD IV, was that it is not possible to disapply any of the remuneration principles under CRD IV (Directive 2013/36/EU) on the basis of proportionality.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.