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14th April 2016

New UCITS V Remuneration Code: SYSC 19E

Implemented 18 March 2016 UCITS V means management firms must now have a remuneration policy & be ready to disclose per SYSC 19E.

UCITS V has now been in force for the last month, since the 18th March 2016, following publication of the FCA’s Policy Statement 16/2 in February 2016.

As such, UCITS management companies will now be subject to the remuneration practices and disclosure requirements over the course of the year under the New Remuneration Code for UCITS.

The final version of the UCITS Remuneration Code is housed in the SYSC Sourcebook (SYSC 19E) as well as transitional and implementation guidance was also published within the FCA’s Policy Statement.

UCITS V Remuneration Policy:

Affected firms should now be implementing a compliant remuneration policy that adheres to the UCITS Remuneration Code requirements effective for the first full performance year from 18th March 2016. In addition they should be considering how they will comply with the new remuneration disclosure regime.

Management firms will also need to have identified those within the firm that are considered UCITS Remuneration Code Staff as these staff will also be subject to a UCITS V compliant remuneration policy from the next performance year.

Disclosure Requirements:

With UCITS V come new requirements for management firms to make disclosures about their remuneration policies within:

• The fund’s prospectus -which must be included by 30th September 2016;
• Key Investor Information Document (KIID) - which must be included at the next time the KIID is updated and no later than 12 months time, by 18th March 2017); and
• Annual Report - which must be included within the first UCITS annual report published on or after the UCITS V Implementation date of 18th March 2016 that relates to the period ending after this date)

ESMA issue UCITS Remuneration Guidelines

At the end of last month, on 31st March 2016, the European Securities and Markets Authority (ESMA) published its final Guidelines on sound remuneration policies under the UCITS Directive and AIFMD. In addition, ESMA also wrote to the European Council, European Commission and European Parliament on the proportionality principle and remuneration rules in the financial sector.

Having confirmed that it is only variable remuneration earned on or after 1st January 2017 that will be affected by the new rules, in likeness to the issues facing the EBA in interpreting CRD IV, ESMA is at present also uncertain as to what extent the underlying legislation can be interpreted and used to reduce or completely disapply certain obligations.

The UK regulators are yet to comment upon this and provide a finalised stance for those in the UK, however much like their statement on the EBA’s Guidelines for Remuneration Policies under CRD IV, it would be anticipated they would look to take a similar stance on proportionality.

UCITS Remuneration Code