Herbert Smith financial incentives schemes checklist: Key points from FSA review and ESMA consultation on remuneration policies and practices

Both the FSA and ESMA have recently launched consultations on proposed guidance relating to firms' financial incentive schemes.   The FSA's consultation marks the beginning of a programme of work which will be taken forward by the Financial Conduct Authority (FCA).  The UK regulator intends to monitor this area closely, and to take follow-up action to assess what firms have done in response to this work. 

Affected firms should now be taking steps to review their financial incentive schemes and to ensure that they are well-managed and structured in a way which enable the firm to treat customers fairly.   To assist firms in reviewing their financial incentive schemes, we have prepared a checklist based on the key points arising from the FSA and ESMA proposed guidelines.  You can access our more detailed bulletin here.

Key actions for firms:

• Review financial incentive schemes, related controls and governance arrangements now – see  checklist
• Make changes to financial incentive schemes, controls or governance arrangements as necessary
• If changes to schemes are necessary, re-negotiate and amend employee contracts to reflect changes
• Consider effectiveness of current management information capture - IT systems may need to be updated
• Communicate and train staff on incentive scheme changes
• Investigate recurring problems, take action and consider whether redress is necessary where customers have suffered detriment
• By 31 October 2012: All firms - review guidance consultation 12/11 and send any comments to the FSA
• By 7 December 2012: MiFID firms - review ESMA Guidelines and send any comments to ESMA