SYSC 19D.1 1Application and purpose
Who? What? Where?
- (1)
The dual-regulated firms Remuneration Code applies to:
- (a)
- (b)
a bank;
- (c)
- (d)
an overseas firm that;
- (i)
- (ii)
has its head office outside the EEA; and
- (iii)
would be a firm in (a), (b) or (c) if it had been a UK domestic firm, had carried on all of its business in the United Kingdom and had obtained whatever authorisations for doing so as are required under the Act.
- (2)
For a firm which falls under (1)(a), (1)(b) or (1)(c), the dual-regulated firms Remuneration Code applies, in a prudential context, in relation to:
- (a)
its UK activities;
- (b)
its passported activities carried on from a branch in another EEA State; and
- (c)
a UK domestic firm's activities wherever they are carried on.
- (a)
- (3)
For a firm that falls under (1)(d), the dual-regulated firms Remuneration Code applies only in relation to activities carried on from an establishment in the United Kingdom.
Subject to the provisions on group risk systems and controls requirements in SYSC 12 (Group risk systems and controls requirements), the dual-regulated firms Remuneration Code:
- (1)
applies in relation to regulated activities, activities that constitute dealing in investments as principal (disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc)), ancillary activities and (in relation to MiFID business) ancillary services;
- (2)
applies in relation to the carrying on of unregulated activities in a prudential context; and
- (3)
takes into account activities of other group members.
When?
- (1)
Except as set out in (2) and (3), a firm must apply the remuneration requirements in SYSC 19D.3 (Remuneration principles) in relation to:
- (a)
remuneration awarded, whether pursuant to a contract or otherwise, on or after 1 January 2011;
- (b)
remuneration due on the basis of contracts concluded before 1 January 2011 which is awarded or paid on or after 1 January 2011; and
- (c)
remuneration awarded, but not yet paid, before 1 January 2011, for services provided in 2010.
[Note: article 3(2) of Directive 2010/76/EU]
- (a)
- (2)
A firm must apply the remuneration requirements in SYSC 19D.3.48R(3) (1:1 ratio of variable to fixed components) and SYSC 19D.3.49R (1:2 ratio of fixed to variable components) in relation to remuneration awarded for services provided or performance from the year 2014 onwards, whether due on the basis of contracts concluded before, on or after 31 December 2013.
[Note: article 162(3) of CRD]
- (3)
A firm must apply the remuneration requirements in SYSC 19D.3.59R(1)(b), SYSC 19D.3.61R(2), SYSC 19D.3.61R(3), SYSC 19D.3.61R(4), SYSC 19D.3.61R(5), SYSC 19D.3.64R and SYSC 19D.3.67R(1)(c) in relation to variable remuneration awarded in relation to the performance year starting on or after 1 January 2016.
Subject to SYSC 19D.1.5R, SYSC 19D.1.3R does not require a firm to breach requirements of applicable contract or employment law.
[Note: recital 14 of Directive 2010/76/EU]
Conflict with other obligations
- (1)
Where a firm is unable to comply with the dual-regulated firms Remuneration Code because to do so would breach a provision of a prior contract (including a provision in a contract with a dual-regulated firms Remuneration Code staff member), it must take reasonable steps to amend or to terminate the provision in question in a way which enables it to comply with the dual-regulated firms Remuneration Code at the earliest opportunity.
- (2)
Until the provision in (1) ceases to prevent the firm from complying with the dual-regulated firms Remuneration Code, it must adopt specific and effective arrangements, processes and mechanisms to manage the risks raised by the provision.
Purpose
- (1)
The aim of the dual-regulated firms Remuneration Code is to ensure that firms have risk-focused remuneration policies, which are consistent with and promote effective risk management and do not expose them to excessive risk. It expands upon the general organisational requirements in SYSC 4.
- (2)
The dual-regulated firms Remuneration Code implements the main provisions of the CRD which relate to remuneration. The Committee of European Banking Supervisors published Guidelines on Remuneration Policies and Practices on 10 December 2010. Provisions of the Capital Requirements Regulations 2013 (SI 2013/3115) together with the EBA’s Guidelines to article 75 of the CRD relating to the collection of remuneration benchmarking information and high earners information have been implemented through SUP 16 Annex 33AR and SUP 16 Annex 34AR. The Guidelines can be found at http://www.eba.europa.eu/documents/10180/757286/EBA-GL-2014-08+%28GLs+on+remuneration+benchmarking+%29.pdf/9d87c18b-ed79-4ceb-a3f6-64928cc26065 and http://www.eba.europa.eu/documents/10180/757283/EBA-GL-2014-07+%28GLs+on+high+earners+data+collection%29.pdf/da42488f-09c1-4558-ae4e-6258e11b8345.
Notifications to the FCA
- (1)
The dual-regulated firms Remuneration Code does not contain specific notification requirements. However, general circumstances in which the FCA expects to be notified by firms of matters relating to their compliance with requirements under the regulatory system are set out in SUP 15.3 (General notification requirements).
- (2)
For remuneration matters in particular, those circumstances should take into account unregulated activities, as well as regulated activities and the activities of other members of a group, and would include each of the following:
- (a)
significant breaches of the dual-regulated firms Remuneration Code, including any breach of a rule to which the provisions on voiding and recovery in SYSC 19D Annex 1 apply;
- (b)
any proposed remuneration policies, procedures or practices which could:
- (i)
have a significant adverse impact on the firm’s reputation; or
- (ii)
affect the firm’s ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the firm; or
- (iii)
result in serious financial consequences to the financial system or to other firms;
- (i)
- (c)
any proposed changes to remuneration policies, practices or procedures which could have a significant impact on the firm’s risk profile or resources;
- (d)
fraud, errors and other irregularities described in SUP 15.3.17R (notification of fraud, errors and other irregularities) which may suggest weaknesses in, or be motivated by, the firm’s remuneration policies, procedures or practices.
- (a)
- (3)
Notifications should be made immediately as the firm becomes aware or has information which reasonably suggests that those circumstances have occurred, may have occurred or may occur in the foreseeable future.
Individual guidance
The FCA's policy on individual guidance is set out in SUP 9. Firms should particularly note the policy on what the FCA considers to be a reasonable request for guidance (see SUP 9.2.5G). For example, where a firm is seeking guidance on a proposed remuneration structure, the FCA will expect the firm to provide a detailed analysis of how the structure complies with the dual-regulated firms Remuneration Code, including the general requirement for remuneration policies, procedures and practices to be consistent with, and promote, sound and effective risk management.