On September 17, the European Securities and Markets Authority (ESMA) published a consultation paper on proposed guidelines on remuneration policies and practices under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID).
The consultation sets out draft guidelines which aim to strengthen investor protection, in the context of existing MiFID rules on conflicts of interest and conduct of business policies relating to remuneration. They are mainly focused on sales activities and retail clients.
For the purpose of the guidelines, remuneration consists of all forms of payments or benefits, provided directly or indirectly, by firms to all staff involved in the provision of investment and ancillary services. This could include client-facing front-line staff, sales staff, their line managers, and other relevant staff such as claims handlers and financial analysts whose remuneration could potentially create an inappropriate incentive to act against the best interests of clients.
The guidelines require an investment firm’s credit institutions and asset managers to have appropriate remuneration policies in place bearing in mind their duty to act honestly, fairly and professionally in the best interests of their clients when providing investment services. Firms should ensure that remuneration is not paid in a manner that aims at circumventing the MiFID requirements and/or the ESMA guidelines.
The comment period runs until December 7. ESMA expects to publish a final report, and final guidelines, by the second quarter of 2013.
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