SYSC 19G.1 General application

1. (1)

   1Subject to (2), the MIFIDPRU Remuneration Code applies to a non-SNI MIFIDPRU investment firm.

2. (2)

   The provisions in (4) do not apply to a non-SNI MIFIDPRU investment firm:

   1. (a)

      where the value of the firm’s on-balance sheet assets and off-balance sheet items over the preceding 4-year period is a rolling average of £100 million or less; or

   2. (b)

      where:

      1. (i)

         the value of the firm’s on-balance sheet assets and off-balance sheet items over the preceding 4-year period is a rolling average of £300 million or less; and

      2. (ii)

         the conditions in (3) are (where they are relevant to a firm) satisfied.

3. (3)

   The conditions referred to in (2)(b)(ii) are:

   1. (a)

      that the exposure value of the firm’s on- and off-balance sheet trading book business is equal to or less than £150 million; and

   2. (b)

      that the exposure value of the firm’s on- and off-balance sheet derivatives business is equal to or less than £100 million.

4. (4)

   The provisions referred to in (2) are:

   1. (a)

      SYSC 19G.6.19R to SYSC 19G.6.21G (Shares, instruments and alternative arrangements);

   2. (b)

      SYSC 19G.6.22R and SYSC 19G.6.23G (Retention policy);

   3. (c)

      SYSC 19G.6.24R to SYSC 19G.6.29R (Deferral); and

   4. (d)

      SYSC 19G.6.35R(2) (Discretionary pension benefits).

5. (5)

   For the purposes of paragraph (2), paragraph (6) applies where a non-SNI MIFIDPRU investment firm does not have monthly data covering the 4-year period referred to in that paragraph.

6. (6)

   Where this paragraph applies, a non-SNI MIFIDPRU investment firm must calculate the rolling averages referred to in paragraph (2) using the data points that it does have.

1. (1)

   1The amounts referred to in SYSC 19G.1.1R must be calculated on an individual basis, and:

   1. (a)

      in the case of on-balance sheet assets, in accordance with the applicable accounting framework;

   2. (b)

      in the case of off-balance sheet items, using the full nominal value.

2. (2)

   The value of the on-balance sheet assets and off-balance sheet items in SYSC 19G.1.1R(2)(a) and (b) must be an arithmetic mean of the assets and items over the preceding 4 years, based on monthly data points.

3. (3)

   A firm may choose the day of the month that it uses for the data points in (2), but once that day has been chosen the firm may only change it for genuine business reasons.

1. (1)

   1When calculating the amounts referred to in SYSC 19G.1.1R(2)(a) and (b), a firm must use the total amount of its on-balance sheet assets and off-balance sheet items.

2. (2)

   A firm must calculate the exposure values referred to in SYSC 19G.1.1R(3)(a) and (b) by adding together the following items:

   1. (a)

      the positive excess of the firm’s long positions over its short positions in all trading book financial instruments, using the approach specified for K-NPR in MIFIDPRU 4.12.2R to calculate the net position for each instrument; and

   2. (b)

      the exposure value of contracts and transactions referred to in MIFIDPRU 4.14.3R, calculated using the approach specified for K-TCD in MIFIDPRU 4.14.8R.

3. (3)

   Any amounts in foreign currencies must be converted into pound sterling using the relevant conversion rate.

4. (4)

   A firm must determine the relevant conversion rate referred to in (3) by reference to an appropriate market rate and must record which rate was chosen.

1. (1)

   1The provisions in (2) apply to a SNI MIFIDPRU investment firm.

2. (2)

   The provisions referred to in (1) are:

   1. (a)

      SYSC 19G.2 (Remuneration policies and practices);

   2. (b)

      SYSC 19G.3.1R to SYSC 19G.3.3R (Oversight of remuneration policies and practices);

   3. (c)

      SYSC 19G.3.6R to SYSC 19G.3.8G (Control functions);

   4. (d)

      SYSC 19G.4.1R to SYSC 19G.4.5R and SYSC 19G.4.7G(1) and (2) (Fixed and variable components of remuneration);

   5. (e)

      SYSC 19G.6.1R (Remuneration and capital);

   6. (f)

      SYSC 19G.6.2R (Exceptional government intervention); and

   7. (g)

      SYSC 19G.6.5R to SYSC 19G.6.6G (Assessment of performance).

1. (1)

   1This rule applies to a non-SNI MIFIDPRU investment firm that did not meet either condition in SYSC 19G.1.1R(2)(a) or (b) but subsequently does.

2. (2)

   The provisions referred to in SYSC 19G.1.1R(2) cease to apply to the firm in (1) if:

   1. (a)

      the firm has met the conditions in either SYSC 19G.1.1R(2)(a) or (b) for a continuous period of at least 6 months (or such longer period as may have elapsed before the firm submits the notification in (b)); and

   2. (b)

      it has notified the FCA that it has met the conditions in (a).

3. (3)

   The notification in (2)(b) must be submitted through the online notification and application system using the form in MIFIDPRU 7 Annex 3R2.

1Where a non-SNI MIFIDPRU investment firm has met the conditions in SYSC 19G.1.1R(2)(a) or (b) but then ceases to do so, it must comply with the provisions referred to in SYSC 19G.1.1R(2) within 12 months from the date on which the firm ceased to meet the conditions.

1. (1)

   1Where a non-SNI MIFIDPRU investment firm ceases to meet the conditions in SYSC 19G.1.1R(2)(a) or (b), it must promptly notify the FCA.

2. (2)

   The notification in (1) must be submitted through the online notification and application system using the form in MIFIDPRU 1 Annex 3R.

1The requirements in SYSC 19G.1.8R(2)(b) and SYSC 19G.1.11R(1) do not apply where a non-SNI MIFIDPRU investment firm has notified the FCA in accordance with the requirements of MIFIDPRU 7.1.9R(2)(b) or MIFIDPRU 7.1.12R(1) of the same event.

1The MIFIDPRU Remuneration Code applies to a firm on an individual basis where the FCA has granted a firm permission under MIFIDPRU 2.4.17R and MIFIDPRU 2.4.18R to apply the group capital test.

1. (1)

   1Subject to (3), where MIFIDPRU 2.5 applies to a UK parent entity, the MIFIDPRU Remuneration Code applies to that UK parent entity on a consolidated basis.

2. (2)

   A UK parent entity that is treated as an SNI MIFIDPRU investment firm in accordance with MIFIDPRU 2.5.21R is also treated as an SNI MIFIDPRU investment firm when applying the MIFIDPRU Remuneration Code on a consolidated basis.

3. (3)

   A UK parent entity that is treated as a non-SNI MIFIDPRU investment firm in accordance with MIFIDPRU 2.5.21R is also treated as a non-SNI MIFIDPRU investment firm when applying the MIFIDPRU Remuneration Code on a consolidated basis.

4. (4)

   The following provisions only apply to a firm on an individual basis:

   1. (a)

      SYSC 19G.1.1R(2), (3), (5) and (6);

   2. (b)

      The provisions listed in SYSC 19G.1.1R(4);

   3. (c)

      SYSC 19G.1.2G to 19G.1.5G; and

   4. (d)

      SYSC 19G.1.8G to 19G.1.13G.

5. (5)

   For the purposes of the MIFIDPRU Remuneration Code, application on a consolidated basis means on the basis of the situation that results from applying the requirements in the MIFIDPRU Remuneration Code to a UK parent entity as if that undertaking, together with all the investment firms, financial institutions, ancillary services undertakings and tied agents in the investment firm group, formed a single MIFIDPRU investment firm.

6. (6)

   For the purposes of (5), the terms investment firm, financial institution, ancillary services undertaking and tied agent apply to undertakings established in third countries, which, if established in the UK, would satisfy the definitions of those terms.

7. (7)

   Where an undertaking in a third country is included in the consolidated situation of a UK parent entity as a result of (6), the MIFIDPRU Remuneration Code only applies in relation to material risk takers at that undertaking who oversee or are responsible for business activities that take place in the UK.

1. (1)

   1Where a firm is subject to the MIFIDPRU Remuneration Code and, as a result of the application of any of the requirements listed in (2), to provisions imposing different remuneration requirements, only one of which can be complied with, it must comply with the most stringent of the relevant provisions.

2. (2)

   The requirements referred to in (1) are:

   1. (a)

      different requirements in the MIFIDPRU Remuneration Code;

   2. (b)

      the AIFM Remuneration Code;

   3. (c)

      the Dual-regulated firms Remuneration Code; and

   4. (d)

      the UCITS Remuneration Code.

1A firm must comply with the MIFIDPRU Remuneration Code in a manner that is appropriate to its size and internal organisation and to the nature, scope and complexity of its activities.

1. (1)

   1The MIFIDPRU Remuneration Code applies to remuneration, including carried interest (which represents a share in the profits of a fund managed by the firm’s staff, as compensation for the management of the fund).

2. (2)

   Where arrangements concerning carried interest meet the conditions in (3), the following provisions do not apply:

   1. (a)

      SYSC 19G.6.19R to SYSC 19G.6.21G (Shares, instruments and alternative arrangements);

   2. (b)

      SYSC 19G.6.22R and SYSC 19G.6.23G (Retention policy);

   3. (c)

      SYSC 19G.6.24R to SYSC 19G.6.29R (Deferral); and

   4. (d)

      SYSC 19G.6.30R to SYSC 19G.6.34G (Performance adjustment).

3. (3)

   The conditions referred to in (2) are that:

   1. (a)

      the value of the carried interest must be determined by the performance of the fund in which the carried interest is held;

   2. (b)

      the period between the award of the carried interest and any payment under it must be at least 4 years; and

   3. (c)

      there are provisions for the forfeiture or cancellation of carried interest that include at least the circumstances set out in SYSC 19G.6.31R(3)(a) and SYSC 19G.6.31R(3)(b).

1For the purposes of the MIFIDPRU Remuneration Code, a carried interest must be valued at the time of its award.

1A firm must apply the MIFIDPRU Remuneration Code from the start of its first performance period that begins on or after 1 January 2022.