The European Securities and Markets Authority (“ESMA”) has published its final guidelines on the remuneration requirements of the UCITS V directive.
The key issue addressed by ESMA is the ability for smaller or less complex managers to disapply certain of the more onerous remuneration requirements (including the “Pay Out Process Rules”) on the basis of the proportionality principle.
In its final guidelines (the “UCITS V Guidelines”), ESMA has removed the specific statement which had been included in the consultation draft that it is permissible for smaller or less complex firms to disapply the Pay Out Process Rules.
However, alongside the UCITS V Guidelines, ESMA has published a letter to the European Commission and European Parliament, in which ESMA states that, in its view, disapplication on the grounds of proportionality is permissible.
Further, in light of the recent uncertainty in this area, ESMA has called for the European legislators to clarify that this is the case, possibly through amendments to the AIFMD and UCITS V directives.
Herbert Smith discuss the approach which ESMA has taken, and how this affects the application of the proportionality principle under UCITS V, AIFMD and CRD IV, in our full briefing.
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