CySEC reiterates EBA CIF Remuneration Policies Guidelines

CySEC has issued a Circular stressing the EBA CIF Remuneration Policies Guidelines for Cyprus Investment Firms operating on the island. What exactly do these Guidelines mean for CIFs? 

4 October, AtoZForex - The key financial regulatory body of Cyprus, the Cyprus Securities and Exchange Commission (CySEC) has issued an important circular today. The Cypriot watchdog has published a Circular addressed to Cyprus Investment Firms (CIFs). In the document, CySEC expresses its will to remind the CIFs about the EBA Guidelines of sound remuneration policies.

CySEC reiterates EBA CIF Remuneration Policies Guidelines

To be more specific, CySEC has referred to the remuneration policies issued by the European Bank Authority (EBA) on June 27, 2016. The Cypriot regulator has further elaborated on the information about the guidelines it requires CIFs to obey.

Specifically, the CySEC stated in the official Circular:

“The EBA CIF Remuneration Policies Guidelines fulfill the mandate given to the EBA under Articles 74(3) and 75(2) of the Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (‘the Directive’), to issue guidelines on sound remuneration policies for all staff and staff whose professional activities have a material impact on institutions’ risk profile. “

What is the purpose of the EBA CIF Remuneration Policies Guidelines?

CySEC highlighted that the key aim of the existent Guidelines is to outline the requirements in regards to the remuneration policies that are applicable to all staff. The Guidelines also set out the specific requirements that must apply to the remuneration policies and various aspects of remuneration of the staff. EBA writes in the official Guidelines document:

“Institutions may also apply these specific requirements to additional categories of staff or to all staff.”

As a matter of fact, these Guidelines have been valid since January 2017.

What Now: CySEC Killing Sales Bonuses?

Following on this, the Cypriot watchdog stresses that CIFs that are obliged to follow the requirements should apply these Guidelines when complying with the requirements laid out in paragraphs 20, 21, 22, 23 of CySEC’s Directive DI144-2014-1. This Directive covers such topics as:

  1. Remuneration policies
  2. Variable elements of remuneration
  3. Remuneration Committee
  4. Maintenance of a website on corporate governance and remuneration

Talking about CIFs staff sales bonuses, the section (d) of paragraph 21 of the Directive di144-2014-14 of 2014 and di144-2014-14(a) of the Cyprus Securities and Exchange Commission for the prudential supervision of investment firms states the following:

“Guaranteed variable remuneration is not consistent with sound risk management or the pay-for-performance principle and shall not be a part of prospective remuneration plans.”

Moreover, in order to verify the compliance of the CIFs with their regulatory obligations, CySEC uses these Guidelines. This implies that during the evaluation of the remuneration policies and variable elements of remuneration CySEC will use the abovementioned EBA CIF Remuneration Policies Guidelines.

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