21 December 2021


There is going to be a new remuneration code relevant to investment firms authorised under the Markets in Financial Instruments Directive: the MIFIDPRU Remuneration Code (the 'MIFIDPRU Code').

The MIFIDPRU Code will replace the current IFPRU and BIPRU Remuneration Codes as a single, consolidated regime. In the FCA Handbook, a new SYSC 19G therefore replaces the current SYSC 19A (IFPRU Remuneration Code) and SYSC 19C (BIPRU Remuneration Code).

When will the MIFIDPRU Code apply?

Firms should apply the new MIFIDPRU Code from the start of their next performance period beginning on or after 1 January 2022. Please note that it is the performance period that is relevant, rather than the date on which remuneration is actually awarded or paid out. As such, the existing BIPRU and IFPRU Remuneration Codes will continue to apply to any remuneration paid out in 2022 which relates to a services or performance period which started in 2021 (or earlier).

How will the MIFIDPRU Code apply?

The MIFIDPRU Code will apply to the majority of MIFID investment firms. However, the new rules aim to impose requirements which are proportionate to the size and complexity of different firms and the degree of risk they present to customers and markets.

For this purpose, the new regime divides firms into two main categories:

1. Small and non-interconnected (SNI) firms, being firms that are lower risk to customers and clients; and

2. Non-SNI firms, being larger more complex firms. Non-SNI firms are then further sub-divided into regular Non-SNI firms and larger Non-SNI firms.

Depending on how your firm is classified, it will then need to adhere to remuneration rules that are either ‘basic’, ‘standard’ or ‘extended’:

  • SNI firms are only required to apply the basic rules;
  • regular Non-SNI firms are required to apply the basic and standard rules; and
  • larger Non-SNI firms are required to apply the basic, standard and extended rules.

For FCA investment firms that are part of a larger group, the FCA may grant permission for the group to apply a group capital test. In this case, no prudential consolidation is required and each FCA investment firm within the group will need to apply their appropriate remuneration rules on an individual basis. Where prudential consolidation is required, the remuneration rules will need to be applied at both the individual-entity and consolidated-group levels.

For guidance on which rules are relevant to you, please refer to our MIFIDPRU Remuneration Code: Employer Guide 2022.

What are the new requirements under the MIFIDPRU Code?

Although the basic rules should be a continuation of what firms are already doing remuneration-wise, the key changes are within the standard and extended remuneration rules. The headlines are:

  • All Non-SNI firms will need to identify their material risk takers ('MRTs') on an annual basis;
  • Regular Non-SNI firms will need to comply with the standard rules regarding the payment of performance-related variable remuneration to MRTs, and larger Non-SNI firms will also need to comply with the extended rules governing the deferral, retention and payment of bonuses in shares or equivalent instruments and new rules on discretionary pension benefits (although an exception will be available);
  • Non-SNI firms will need to apply malus and clawback provisions to variable remuneration;
  • Non-SNI firms will need to set an appropriate ratio between the variable and fixed components of the total remuneration and set out the ratio in the firm’s remuneration policy;
  • The FCA is proposing to require larger Non-SNI firms to have risk, nomination and remuneration committees in place (replacing the existing requirements for ‘significant IFPRU’ firms);
  • There are new rules regarding the payment of ‘sign-on bonuses’, retention awards, buy-out awards and severance pay;
  • The MIFIDPRU Code contains guidance to help determine which types of payments to partners and members of LLPs should be treated as remuneration vs. return on equity;
  • The FCA have confirmed that the MIFIDPRU Code will apply to carried interest, although there is a new rule that requirements on pay-out instruments, deferral, retention and ex-post adjustment do not apply to carried interest where certain conditions are met;
  • It is now the case that returns on co-investment arrangements will be considered remuneration only where the investment is made using a loan provided by the firm or a member of the group to which the firm belongs (providing the loan is not given to the individual on commercial terms or is not fully repaid by the time the return on the investment is paid);
  • The FCA has proposed that all investment firms must have a gender-neutral remuneration policy in place for all staff to cover the key components of the MIFIDPRU Code and Non-SNI firms should further ensure their remuneration policies and practices are subject to an annual review by staff engaged in control functions;
  • All FCA investment firms must continue to make public disclosures in relation to their remuneration practices. The extent of disclosure required varies under the basic, standard and extended rules.

For more details on these requirements and how they apply, please refer to our MIFIDPRU Remuneration Code: Employer Guide 2022.

What to do next?

1. Download our employer’s guide for a breakdown of how the MIFIDPRU Code applies to you and for a more in-depth look at the key requirements. A checklist of action points is also included to help you prepare for implementation.

MIFIDPRU Remuneration Code: Employer Guide 2022

2. Assess your firm’s categorisation to determine which of the ‘basic’, ‘standard’ and ‘extended’ remuneration rules apply.

a. Are you an SNI or Non-SNI Firm?

b. Are you classed as a regular or larger Non-SNI?

3. Identify when you will be required to begin applying the MIFIDPRU Code and review your existing remuneration policies and practices to identify any gaps.

Key contact

Nigel Watson

Nigel Watson Partner

  • Share Plans and Incentives
  • Corporate
  • Employment Tax

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