The FSA has released further consultative guidance on the Remuneration Code (see Regulatory Roundups 29 & 32 for previous guidance).
The guidance, in the form of a ‘Dear CEO’ letter, actually consists of two separate documents: one exclusively for Tier 1 firms with the other one providing guidance for Tier 2, 3 & 4 firms.
As will be known, the universe of firms subject to the Remuneration Code (Code) was enlarged from around 27 to over 2,500 this January, when the relevant parts of CRD3 were transposed into the Handbook (SYSC 19A). The majority of such firms will be Tier 4 firms but if you are uncertain then please feel free to discuss with your usual Complyport contact; alternatively the ‘Proportionality Guide’ in Appendix 2 of PS10/20 will assist.
Following the expiration of a transitional provision last month, all BIPRU firms are now subject to the Code.
All firms within the scope of the Code need to ensure that their remuneration policies, practices and procedures are documented. The FSA has previously provided a template for a ‘Remuneration Policy Statement’ (RPS) – a link to which was included in Regulatory Roundup 29 and is also on the left of this article. It’s not compulsory, and firms can choose to document their remuneration policies in a different way, but will serve as a useful checklist. All firms are expected to have in place a RPS, or equivalent, no later than three months before the date on which their proposed bonus amounts are to be finalised and signed off.
Firms are advised that remuneration has been raised in a number of ARROW programmes. Firms that are not subject to ARROW should be aware that the FSA intends to assess compliance through thematic reviews-the first of which is likely to take place in the first half of 2012.
Firms are also expected to take account of risks arising from their remuneration policy when considering their ICAAP. From this September, as part of their supervisory processes, the FSA will be looking for evidence that remuneration risk has been given appropriate consideration in the ICAAP.
Annex 1 of the ‘Dear CEO’ letter offers further guidance on defining Remuneration Code staff as well as Long Term Incentive Plans (Remuneration Principle 8) and the structure of alternative instruments (Remuneration Principle 12(f)), although the latter will not be relevant to Tier 3 & 4 firms.
