Dan Waters on Remuneration

Dan Waters, the FSA’s Asset Management Sector Leader, gave an interesting speech at the AIMA Annual Conference which might provide some comfort for those in the asset management sector that have concerns about the impact of the current proposed revision of the Remuneration Code arising from changes to the CRD (see Regulatory roundup 20 for further information and links to other articles on this subject, including the concept of ‘proportionality’).

Reassurance was given that whilst asset management is, of course, subject to the CRD, and therefore caught by the new rules on remuneration, the FSA’s approach to the CRD’s requirements on remuneration will be based on a clear understanding of the different business models of fund management and banking (which allows for ‘proportionality’ to be applied).

However, it is the view of the FSA that whilst the failure of a fund manager as a result of risky trading does not pose the same possible systemic disruption as that of a bank, the potential impact of a fund, or a group of funds, could have a ‘systemic presence’ in the market or a vulnerable sub-sector of the market. Hedge funds were quoted as the most obvious example.

As in previous speeches, firms were encouraged to engage in the debate (the consultation period ends 8 October) and a commitment was made to working diligently to ensure a proportionate solution.

In the concluding comments an offer was made: “if the industry has a different proposition as to how proportionality might be handled in implementing the CRD, we are very open to hearing it and we would like to hear it soon.” (as mentioned above, please refer to previous Regulatory Roundups for a summary of the current ‘proportionality’ approach that could be applied to investment managers)

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