FCA publishes final IFPR remuneration rules

The FCA has now published final rules relating to the Investment Firms Prudential Regime, including a final version of the new MIFIDPRU Remuneration Code (“SYSC 19G”) that will apply to UK investment firms including asset managers, hedge funds and investment advisers, for performance years commencing on or after 1 January 2022. SYSC 19G is contained within FCA 2021/38 at page 511 onwards.

Along with SYSC 19G, the FCA has published an updated version of its General guidance on the application of ex-post risk adjustment to variable remuneration, which sets out the FCA’s expectations regarding the application of malus and clawback under SYSC 19G and the Dual-regulated firms Remuneration Code. The guidance will be of greater relevance going forwards given the mandatory application of clawback to the vast majority of UK investment firms under SYSC 19G.

The FCA has also published:

• a Remuneration Policy Statement template, which may assist firms in drafting remuneration policies which are compliant with SYSC 19G (albeit in some respects the template goes beyond the requirements of SYSC 19G); and
• a Material Risk Takers template spreadsheet, which firms can use to record the individuals identified as MRTs.

Comment

As expected, the final version of SYSC 19G is effectively identical to the draft rules published by the FCA in its July policy statement. As described in our Guide to the MIFIDPRU Remuneration Code, SYSC 19G broadly mirrors the EU Investment Firms Directive regime, subject to divergence on a limited number of issues. For most BIPRU and IFPRU firms who disapply the current pay-out process rules on proportionality grounds, it is therefore likely that the only significant changes will be the mandatory application of clawback provisions and the need to set maximum ratios between fixed and variable remuneration. Only the largest UK investment firms will be required to apply the full pay-out process rules under SYSC 19G (deferral, payment in instruments, retention).

To the extent that investment firms have not yet identified material risk takers and/or reviewed their remuneration policies and practices and implemented any necessary changes to reflect SYSC 19G, this should be done by the end of 2021.

The FCA intends to publish a further policy statement later this year in response to its third IFPR consultation paper (published in August 2021), which includes provisions relating to remuneration disclosures.

The FCA’s press release on the final rules is available here.

We will continue to keep you up to date on IFPR. If you have any queries, please contact a member of the Remuneration and Incentives team.