Remuneration Code
The FSA's revised Remuneration Code came into effect on 1 January 2011 and now covers a wide range of firms (some 2500 in total). Transitional arrangements allow firms within the extended scope until 1 July to become fully compliant.
The stated aim of the Code is "To ensure that firms have risk-focused remuneration policies which are consistent with and promote effective risk management and do not expose them to excessive risk."
The Code applies to all BIPRU and third country BIPRU firms. However, guidance produced by the FSA to accompany the revised requirements provides for proportionate application, particularly of those requirements relating to remuneration structures. In particular, for firms in proportionality tier 4 (all limited licence and limited activity firms), the FSA has stated that compliance should not be "particularly onerous".
Firms must identify those individuals who are "Code Staff" (broadly those undertaking significant influence functions, any other 'risk takers' and others in the same remuneration bracket as these two categories of staff). Code Staff need to be made aware of the implications and must undertake not to enter into personal investment strategies or other arrangements that might undermine the risk mitigating elements within their remuneration.
The revised code applies 12 remuneration principles, covering matters such as governance over remuneration, structure of remuneration and avoidance of conflicts of interest.
In relation to the Remuneration Code the FSA have stated in their 2011/12 Business Plan that they will ensure that it is "rigorously applied". Watch this space for enforcement action in due course.