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ARE YOU COMPLYING WITH THE MIFIDPRU RENUMERATION CODE?

22/08/22

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22 August 2022

As we are more than halfway through the year, MIFIDPRU investment firms should be coming to terms with IFPR.

No doubt, you are now familiar with the jargon and at least some of you will have completed your first annual ICARA and submitted an MIF007. If not, you’re probably preparing to do so in the next couple of months.

Another crucial aspect of IFPR, which has been almost forgotten by those busy navigating the new regime, is the MIFIDPRU Renumeration Code (SYSC 19G). It applies to performance periods starting on or after 1 January 2022.

Assessment and reporting

At this juncture, you may have determined your category and started reporting data to the FCA proportionate to the size, nature, scale and complexity of the risks that exist in the business model and activities of your firm.

If you are an SNI, you will be expected to report in accordance with the basic renumeration requirements. Non-SNI businesses will most likely be reporting information based on the basic AND standard requirements. The more complex, extensive requirements only apply if you exceed certain balance sheet and exposure thresholds. They are:

  • The value of the firm’s on-balance sheet assets and off-balance sheet items during the preceding four-year period has a rolling average of more than ÂŁ100 million, or…
  • The value of the firm’s on-balance sheet assets and off-balance sheet items during the same period has a rolling average of more than ÂŁ300 million. If this applies, you must also have:
    • An exposure value of on and off-balance sheet trading book business that is more than ÂŁ150 million and an on and off-balance sheet derivatives business of more than ÂŁ100 million.

To aid firms, the FCA has provided non-mandatory self-assessment templates – RPS template; Table of material risk takers (MRTs) – that take you through the different requirements according to firm type. These give you a good indication of the extent of your renumeration assessments and the information you are expected to report in your annual MIF008.

Disclosures

For the first full performance period starting after 1 January 2022, a MIFIDPRU investment firm is required to make its first disclosures on its renumeration policies and practises on the date it publishes its annual financial statements.

You must publicly disclose the renumeration annually, preferably on your website, or more frequently if there is a major change to your business model or a merger has taken place. Former BIPRU firms will notice some overlap with the Pillar 3 disclosures.

Generally, you are required to reveal your main performance objectives and the total amount of renumeration awarded for the performance period, split between fixed and variable.

Non-SNIs will have to make further qualitative and quantitative disclosures to cover:

  • The framework and criteria used for ex-ante and ex-post risk adjustment of remuneration (measuring and allocating bonuses)
  • The policies and criteria applied for the award of guaranteed variable renumeration
  • The policies and criteria applied for retention awards, buy-out awards and severance pay
  • Key indicators that the professional activities of a staff member have a material impact on the risk profile of the firm or of the assets that the firm manages
  • The total number of MRTs
  • The types of staff it has identified as MRTs; and
  • The split between non-MRTs and MRTs, including
    • the total amount of renumeration awarded
    • the fixed renumeration awarded
    • the variable renumeration awarded (subject to malus and clawback provisions) and ex-post adjustments made.

Renumeration can be a highly technical (and sensitive) subject to navigate, but don’t worry – if you’re not sure what to do, we can help you review your existing practises against the new MIFIDPRU rules. We will identify any gaps in your policies and ensure they are compliant with the framework, suggesting updates or improvements, where necessary.

If you would like us to discuss how to apply the new MIFIDPRU Renumeration Code, don’t hesitate to contact us. Telephone (0161) 979 0726 or email: info@b-compliant.co.uk

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