The FSA has recently produced two papers relevant to those
working on financial services remuneration.
Data collection
In August, the FSA produced a consultation paper on remuneration
reporting requirements for BIPRU firms and third country BIPRU
firms. Click here
to access the paper. This has its origin in the CRD 3
requirement for national authorities to submit data to the European
Banking Authority (EBA). The FSA has now published its own
proposals following on from the EBA draft guidelines in July.
Larger institutions
The first part of this proposal is that firms/groups with total
assets of £50 bn or more will have to submit information on
the structure of remuneration in the group. This broadly equates to
some 15 or so firms/groups and is equivalent to the proposed new
Level 1 and 2 definition of the proposed proportionality regime.
The stated purpose of this is the help the EBA to understand how
remuneration is changing and differences between member states.
Total assets are measured at the end of the previous financial
year. These rules only apply where the FSA is lead or sole
regulator of a firm. Reports should be made on a consolidated basis
where appropriate and include general information as well as
information on Code Staff. The first data is to be delivered
to the FSA by 31 December 2012 and will cover the last two complete
financial years that ended before the rules come into effect on 1
November 2012. Accordingly, a firm with a calendar year end would
have to submit 2010 and 2011 data by the end of 2012. Thereafter
data is due within two months of a year end.
This data is anonymous and will not be publicly published.
However, it will invariably overlap with what firms are already
reporting as part of the Remuneration Policy Statement
framework.
All firms other than solo limited licence and limited activity
firms
The second part is a high earners report under which firms/groups
other than solo limited licence and limited activity firms, will
have to submit anonymous data on employees in the group with total
annual remuneration of €1 m or more. There is no size
threshold for this part of the reporting requirement and it should
not include data from non-EEA branches and subsidiaries. The
€1 m limit will be set in non-euro currencies on an annual
basis according to exchange rates set by the EBA. A separate
template will be required for staff in each member state in which
the institution is operating. Employees operating in more than one
country should be reported under the country to which they are most
closely linked. There is a specified Excel spreadsheet which must
be used. A nil return is required even if no earners earn above
this level (though the FSA are likely to come under some pressure
to drop this proposal). The deadlines and years for which data
needs to be submitted are as for the larger institutions reports
set out above.
The FSA will also be using the data gathering exercise to ask for
additional diversity data on a voluntary basis. This will not be
published (nor shared with the EBA) and will only relate to
employees working in the UK.
The consultation period ends on 30 September 2012.
Sales incentives
The FSA's recent paper on sales incentives generally
for more junior staff has received significant publicity.
Click here to
access the paper. So far most of the FSA's public work has been
on remuneration frameworks for more senior staff with a view to
preventing firm-wide weakness which damages the financial
institution. Here the FSA is emphasising practices which damage the
consumer (albeit that the knock on effect damages the financial
institution once compensation and other claims have been
resolved).
No specific changes are outlined here, but the FSA does say that
repeated warnings about mis-selling do not seem to have been
successful in light of continuing enforcement cases and that they
are therefore considering whether to strengthen their rules in this
area. This will be a workstream that the FCA will take forward once
it is up and running, which would represent yet another angle to
remuneration compliance. In the interim the FSA reminds firms that
they should make sure that they have sufficient management
information, business quality monitoring and controls on
inappropriate behaviour and governance arrangements to counteract
poor behaviour.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 10/09/2012.