On Wednesday 3 July, the European Parliament voted on the draft text of the Undertakings for Collective Investments in Transferable Securities (UCITS V) Directive. This Directive will introduce remuneration rules for UCITS fund managers.

Summary

The approved text has the following differences to the original proposal in relation to remuneration:

  • The provision to introduce a variable remuneration cap of 100% of fixed remuneration has been removed altogether; and
  • The minimum proportion of variable remuneration which must be deferred has been raised from 25% to 40%.

This brings the remuneration rules for UCITS fund managers in line with those under the Alternative Investment Fund Managers Directive ( AIFMD).

Next steps

The vote on this draft text now gives the European Parliament's negotiators a mandate to fine tune the final rules via three-way talks with EU member states and the European Commission. The negotiations with member states are expected to start in September 2013.

The Deloitte view

Firms will welcome the removal of the bonus cap from the draft text. As previously proposed, the 1:1 cap on the ratio of fixed to variable remuneration would have been more stringent than that imposed on banks under the forthcoming Capital Requirements Directive IV (CRD IV) and the AIFMD.

The increase of the minimum proportion of variable remuneration to be deferred from 25% to 40% brings the UCITS V text in line with the remuneration requirements under AIFMD. The harmonisation of these directives will make it simpler for fund managers of both UCITS funds and AIFs to apply the remuneration rules across their employee population.

However, these rules could still require material changes to the way that fund managers remunerate their staff and the governance around remuneration. We are actively discussing with firms the extent to which these requirements affect fund managers and which aspects of their existing remuneration policies and practices need to be considered to comply in time.

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