You may well have seen comments recently about the likely impact of the AIFMD on the implementation of the Remuneration Code for asset managers. This is a question that should be getting rather more attention even than it already is, despite the picture being far from clear. The ‘threat’ is that ESMA, in producing guidelines on the application of proportionality for the Code under AIFMD, might consider itself to be obliged to bring back ‘deferral’ and non-cash bonuses for alternative investment fund managers and their delegates, including anyone managing the assets of an AIF (any non-UCITS fund). There has been press comment suggesting that ESMA had somehow published something about this ‘in the small print’. That is not the case.

The grounds for concern are that, whereas when CEBS dealt with CRD3 on this at the end of last year, it was covering a wide spectrum of sectors, including banks, the AIFMD remuneration requirements relate only to fund managers and their delegates. Consequently, with CRD, it was possible to apply the key measures only to the high risk sectors; with AIFMD, there is much less scope for differentiation and consequent selective application of those same key measures, all of which appear in the AIFM Directive itself (i.e. in Level 1).

However, the optimists take the view that ESMA would be unlikely to overturn what was done by CEBS (now EBA) only a few months ago, especially since the directive explicitly requires ESMA to work with EBA on this point. ESMA will recognise the damage that it would do to the new structure of European supervisory authorities if it brought about such an early u-turn. Consistency and acceptability will be high in their priorities.

The reason that the position on this remains unclear is that, while ESMA is working on Level 2 of AIFMD, it will not start on the guidelines. That means that we will not see any pronouncement from them on this until November at the very earliest, and more likely in January next year. However, that does not mean that it is too early to talk to them about it. With the Level 2 Public Hearing coming up on 2nd September, there should be opportunities to raise the point with them. If you would like to discuss this, give me a call.