French financial regulator the AMF has incorporated the European Securities and Markets Authority (ESMA) MiFID II remuneration regulations into a new Position DOC-2023-03, which covers design, governance, and controlling risks related to remuneration policies. The current AMF guidelines will be repealed when the new ESMA Guidelines take effect on October 3, 2023.
MiFID II remuneration regulations aim to prevent firms from remuneration or assessment of staff that conflicts with their duty to act in the best interests of clients. Focussing on remuneration practices, conflicts of interest rules and the fair treatment of clients. Investment service providers, including asset management companies, must develop and implement remuneration policies to prevent conflicts of interest.
The main policy goal of the MiFID II remuneration regulations, according to FCA policy statement 17/5 (pages 64 to 67), is that firms should not compensate or evaluate the performance of their staff in a way that conflicts with the staff members’ obligation to act in the best interests of their clients
Affected firms should think about whether variable remuneration is calculated in a way that avoids conflicts between employees’ interests and those of a client, such as:
- The remuneration components of variable pay should be assessed effectively to prevent conflicts of interest.
- Sales practises should be covered by compliance guidelines, and sales people adequately trained in compliance rules
- Existing bonus deferral programmes should be modified (or new plans should be implemented) to comply with regulatory obligations.
- existing remuneration which may conflict with client interests should be clearly stated in Remuneration Policy Statements, which are thorough and consistent with all other regulatory disclosures.