The European Securities and Markets Authority has published a consultation paper on proposed guidelines on remuneration of alternative investment fund managers.
ESMA’s future guidelines will apply to managers managing alternative investment funds including hedge funds, private equity funds and real estate funds.
These funds will be asked to introduce sound and prudent remuneration policies and structures with the aim of increasing investor protection and avoiding conflicts of interest that may lead to excessive risk taking.
The Alternative Investment Fund Managers Directive (AIFMD) establishes a set of rules that AIFMs have to comply with when establishing and applying a remuneration policy for certain categories of their staff.
The AIFMD also requires ESMA to develop guidelines on sound remuneration policies to further clarify the Directive’s provisions.
Overall, the guidelines are aligned with remuneration policies in other financial sectors and deliver against the G20 commitments on sound remuneration as set out in the Financial Stability Forum’s Principles for Sound Compensation Practices.
Steven Maijoor, ESMA chair, says: “The proposed remuneration guidelines for alternative investment funds are an important step in creating a single EU rulebook by ensuring the consistent application of the AIFMD remuneration requirements across member states.
“Given our co-operation with the European Banking Authority on remuneration principles, we expect that the future guidelines will ensure consistency of the rules for remuneration across financial sectors. This consistency will help strengthen the protection of investors and avoid the creation of adverse incentives for those managing alternative investment funds.”
The consultation runs until the end of September and ESMA aims to publish a final report before the end of 2012, so that they will be in place in advance of the AIFMD transposition deadline of 22 July 2013.