ESMA proposes remuneration guidelines for investment firms

Dr Anton John Mifsud | Published on 03 Oct 2012

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The European Securities and Markets Authority (ESMA) has proposed a number of guidelines on remuneration policies and practices under the Markets in Financial Instruments Directive (MiFID). These guidelines mainly seek to strengthen investor protection, with the implementation of the MiFID rules on conflict of interest seeking to prevent any future mis-selling scandals affecting retail investors across Europe.

The newly-introduced guidelines will apply to credit institutions, firms and fund management companies when providing investment services, as well as to the competent authorities associated with their supervision. Ensuring that the appropriate remuneration policies and practices are in place will become a priority to firms, since the primary objective behind the guidelines was especially one of promoting the obligation to act honestly, fairly and professionally in the best interests of the client. This strategy was highlighted by the ESMA Chairman, Steven Maijoor, who emphasized that “[t]he consistent application of ESMA’s remuneration guidelines will help strengthen investor protection... for Europe’s retail investors no matter where they invest.”

The key elements discussed in the guidelines mainly revolve around the general obligations applying to firms; the types of remuneration by firms to relevant persons involved in the provisions of investment services to clients; and of the remuneration of all staff involved in the provisions of these investment services.

The consultation period for the draft MiFID guidelines extends up to the 7th December, 2012, with the publication of the final version expected towards the second quarter of 2013.

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