[ESMA35-43-3565 ] Guidelines on certain aspects of the MIFID II remuneration requirements

Following the publication of the Final Report on Guidelines on certain aspects of the MiFID II remuneration requirements (please see EventID=15060), the ESMA has published its final updated guidelines that set out expectations regarding the governance and design of remuneration policies and procedures and address risks that can be inherent in such policies and ways to mitigate these.
To recall, in its consultation (please see EventID 12147 in this context), ESMA suggested to use its 2013 guidelines as a basis for coming up with new guidelines regarding remuneration requirements under the Markets in Financial Instruments Directive II (MiFID II), thereby making amendments to
(1) enhance clarification on certain issues,
(2) incorporate findings from supervisory actions of national competent authorities, and
(3) integrate some changes of MiFID II, particularly with respect to „best interest of the customer“.
The present final updated guidelines are structured in an entirely new way – as compared to the 2013 guidelines – to include three sections as proposed in the consultation:
1. Design of remuneration policies and practices: this section includes the definition of qualitative and quantitative criteria for remuneration and also incorporates a post-evaluation measure to assess the adequacy of the policies and practices;
2. Governance: this section includes guidelines with respect to the documentation of policies, regular reviews, or the process of changing policies; and
3. Controlling risks related to remuneration policies and practices: this final section includes the setup of control mechanisms to assess the adequacy of the policies. In this last section, ESMA also addresses the issue of how to establish such mechanisms if the provision of investment services is outsourced to a third party provider.
Finally, the final updated guidelines include a new Annex which provide „illustrative examples of remuneration policies and practices“ that may be harmful for purposes of avoiding conflicts of interest.