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Asset Managers find themselves in a situation of unparalleled complexity regarding remuneration regulation. And yet Asset Managers are, by their very nature, agency-based businesses incapable of taking the sort of balance-sheet risks for which remuneration regulation was originally intended and designed. Asset Managers neither pose material risk to the financial system, as large banks and insurers do; nor do they raise the same investor protection concerns such as banks, where the business model is to co-mingle and speculate client and firm assets from a shared balance-sheet. There is a real danger that firms undertaking the same business find themselves subject to different rules depending how they are structured. This cannot be the desired outcome where the principle of same risk, same rule would seem to be particularly appropriate.
Alfi would urge ESMA as the competent European securities markets authority to adhere to this course when finalising its Guidelines by deciding that sectoral remuneration rules are not only necessary, but also the most effective and proportionate mean to attain the “UCITS V” stated policy objectives. Its response, therefore, resolutely defends the recognition of the principle of proportionality as a core EU governance principle at the cornerstone of EU legislation and policy-making applied to the financial industry against the very recent and controversial reading of this same principle, as presented in the EBA’s consultation paper (EBA/CP/2015/03) on draft Guidelines on sound remuneration policies under “CRD IV” (2013/36/EU) published on 4 March 2015.
Alfi is pleased to respond to ESMA’s particular request for quantitative (cost-benefit) data around the two major issues on which ESMA is expected to provide additional guidance as compared to AIFMD Guidelines – namely, the concept of ‘proportionality’ (under this question) and the application of different sectoral rules.