- FSA to Strengthen Remuneration Code
- December 27, 2010
- Law Firm: Proskauer Rose LLP - New York Office
On December 17, 2010, the UK Financial Services Authority (the “FSA”) published its final revised Remuneration Code rules which comes into force on January 1, 2011 (and covers bonus payments with respect to the 2010 fiscal year). Limited transitional provisions have been provided. For example, firms must comply with the applicable principles relating to remuneration structures by July 1, 2011 at the latest, while the FSA will expect firms to have made their first public disclosure of remuneration by no later than December 31, 2011.
The Remuneration Code will cover all banks, building societies and "Capital Adequacy Directive" investment firms. The latter category includes most hedge fund managers, many UCITS firms, plus some firms which engage in venture capital, corporate finance, the provision of financial advice and brokers. More specifically, the Remuneration Code does not apply to non-MIFD firms or to certain exempt CAD firms so many private equity firms will not be covered.
In order to apply the Code proportionately, the FSA has introduced the concept of tiers (1 to 4) to which firms will be allocated according to their size and activities. Firms in tier 1 will be required to apply the Code most strictly, while those in tier 4 may ignore some parts of the Code and choose either to comply with other principles or explain their non-compliance. We would anticipate that the vast majority of our clients in the alternative assets industry who are covered by the Code will fall within Tier 4.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.