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SYSC 19G.1 General application

Application: non-SNI MIFIDPRU investment firms

SYSC 19G.1.1R
  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.

SYSC 19G.1.2G
  1. (1)

    1For the purposes of SYSC 19G.1.1R(5), the FCA expects a non-SNI MIFIDPRU investment firm to have insufficient data for a period only where it did not carry on any MiFID business during that period, or where (for periods prior to the application of the MIFIDPRU Remuneration Code) the firm did not record the relevant data on a monthly basis.

  2. (2)

    Where a firm doesn’t have all the monthly data points, the firm should use the data points it has in the way that paints the most representative picture of the period in question. For example, if a firm has monthly data for 2 years of the 4-year period, but prior to that only recorded the relevant data on a quarterly basis, the firm could sensibly calculate its rolling average by using the quarterly figure for each of the 3 monthly data points in each quarter.

SYSC 19G.1.3R
  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.

SYSC 19G.1.4R
  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.

SYSC 19G.1.5G

1The FCA considers that an example of an appropriate market rate for the purposes of SYSC 19G.1.4R(4) is the relevant daily spot exchange rate against pound sterling published by the Bank of England.

Application: SNI MIFIDPRU investment firms

SYSC 19G.1.6R
  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).

Application: summary of application to MIFIDPRU investment firms

SYSC 19G.1.7G
  1. (1)

    1The effect of the application provisions in SYSC 19G.1.1R to 19G.1.6R is summarised in the following table.

    Type of firm

    Applicable sections

    Non-SNI MIFIDPRU investment firm not falling within SYSC 19G.1.1R(2)

    The MIFIDPRU Remuneration Code

    Non-SNI MIFIDPRU investment firm falling within SYSC 19G.1.1R(2)

    The MIFIDPRU Remuneration Code except for:

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

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

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

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

    SNI MIFIDPRU investment firm

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

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

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

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

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

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

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

  2. (2)

    MIFIDPRU 1.2 contains provisions regarding the classification of a firm as a SNI MIFIDPRU investment firm and non-SNI MIFIDPRU investment firm.

Application: where the application of SYSC 19G.1.1R changes in relation to a firm

SYSC 19G.1.8R
  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.

SYSC 19G.1.9G

1The effect of SYSC 19G.1.8R(2)(a) is that a firm may move between meeting the conditions in SYSC 19G.1.1R(2)(a) and (b) during the 6-month period.

SYSC 19G.1.10R

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.

SYSC 19G.1.11R
  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.

SYSC 19G.1.12G

1Where a firm ceases to meet the conditions in SYSC 19G.1.1R(2)(a) or (b), but subsequently meets the conditions again within a period of 6 months, the firm will still be subject to the provisions referred to in SYSC 19G.1.1R(2) for 12 months after the date on which it first ceased to meet the conditions. The firm only ceases to be subject to the provisions referred to in SYSC 19G.1.1R(2) where it meets the conditions in SYSC 19G.1.8R(2).

SYSC 19G.1.13R

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.

Application: collective portfolio management investment firms

SYSC 19G.1.15G
  1. (1)

    1A collective portfolio management investment firm must assess the thresholds in SYSC 19G.1.1R(2) and (3) on the basis of the total of both its MiFID business and non-MiFID business.

  2. (2)

    SYSC 19G.1.20R to SYSC 19G.1.23G explain the position for firms subject to the MIFIDPRU Remuneration Code and another FCA remuneration code.

Application: levels of application

SYSC 19G.1.16G

1SYSC 19G.1.1R to SYSC 19G.1.15R and SYSC 19G.1.17R explain when the MIFIDPRU Remuneration Code applies to a firm on an individual basis. SYSC 19G.1.18R and 19G.1.19R explain when the MIFIDPRU Remuneration Code applies on a consolidated basis, and what that means.

SYSC 19G.1.17R

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.

SYSC 19G.1.18R
  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.

SYSC 19G.1.19G
  1. (1)

    1Where the MIFIDPRU Remuneration Code applies on a consolidated basis, the effect of SYSC 19G.1.18R(5) is that the UK parent entity and all the investment firms, financial institutions, ancillary services undertakings and tied agents in the investment firm group are treated for these purposes as a single MIFIDPRU investment firm. This means, for example, treating a staff member of an undertaking within the investment firm group as if they were a staff member of the UK parent entity.

  2. (2)

    When considering which rules in the MIFIDPRU Remuneration Code apply on a consolidated basis, a UK parent entity must consider whether it is treated as an SNI MIFIDPRU investment firm or a non-SNI MIFIDPRU investment firm under MIFIDPRU 2.5.21R (which, as SYSC 19G.1.18R(2) and (3) explain, also determines its categorisation under the MIFIDPRU Remuneration Code).

  3. (3)

    The effect of SYSC 19G.1.18R(4)(b) is that a UK parent entity need not comply with the provisions listed in SYSC 19G.1.1R(4) on a consolidated basis. These provisions apply on an individual basis where a firm exceeds the thresholds in SYSC 19G.1.1R(2)(a) or (b). As these thresholds are not relevant where the MIFIDPRU Remuneration Code applies on a consolidated basis, the provisions concerning them are also disapplied.

Application: firms subject to different remuneration requirements

SYSC 19G.1.20R
  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.

SYSC 19G.1.21G
  1. (1)

    1SYSC 19G.1.20R states that where different remuneration requirements apply to a firm it must comply with the most stringent of the relevant provisions. Some non-exhaustive examples follow.

  2. (2)

    Example 1: A firm may be subject to different requirements under the MIFIDPRU Remuneration Code on an individual basis and on a consolidated basis. This scenario may arise because a firm is an SNI MIFIDPRU investment firm on an individual basis but a non-SNI MIFIDPRU investment firm on a consolidated basis.

  3. (3)

    Example 2: Different remuneration requirements may apply to a firm when an investment firm group contains both a PRA-designated investment firm and an FCA investment firm (but not a credit institution). This may lead to a firm being subject to both the MIFIDPRU Remuneration Code and the Dual-regulated firms Remuneration Code.

  4. (4)

    Example 3: A staff member at a collective portfolio management investment firm may be a material risk taker and also AIFM Remuneration Code Staff or UCITS Remuneration Code Staff. In this case the material risk taker will be subject to the MIFIDPRU Remuneration Code and the requirements of the AIFM Remuneration Code or the UCITS Remuneration Code.

SYSC 19G.1.22G

1The effect of SYSC 19G.1.20R is that a firm must consider which requirement is the most stringent on a provision by provision basis.

SYSC 19G.1.23G

1SYSC 19G.1.20R is not relevant where a firm can comply with both sets of remuneration requirements, for example requirements to establish, implement and maintain remuneration policies and practices on both an individual basis and a consolidated basis.

Application: staff

SYSC 19G.1.24G

1The term ‘staff’ should be interpreted broadly in the MIFIDPRU Remuneration Code to include, for example, employees of the firm itself, partners or members (in the case of partnership structures), employees of other entities in the group, employees of joint service companies, and secondees.

Application: performance periods

SYSC 19G.1.25G

1The rules in the MIFIDPRU Remuneration Code apply to each performance period, regardless of whether it is annual, quarterly, or another frequency. A firm must comply with the rules on performance assessment and risk adjustment in relation to each such performance period.

Application: proportionality

SYSC 19G.1.26R

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.

Application: carried interest

SYSC 19G.1.27R
  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).

SYSC 19G.1.28R

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

Application: general

SYSC 19G.1.29G

1While the rules in the MIFIDPRU Remuneration Code set out the minimum regulatory requirements that a MIFIDPRU investment firm must comply with, the FCA considers it good practice for a firm to assess whether going beyond those regulatory requirements would contribute to sound risk management or a healthy firm culture.

When?

SYSC 19G.1.30R

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