Bonus caps for fund managers and safeguards for retail investors
Investment fund managers' bonuses must be capped, their salaries must be linked to their funds' performance said Economic and Monetary Affairs Committee MEPs in a draft law voted on Thursday. Individual investors' money must also be better protected, they added.
"The UCITS bonus cap will help strengthen investor protection and reduce risky speculation. It will also complement the recently-adopted EU rules capping bankers' bonuses, ensuring these rules cannot be circumvented and providing for a level playing field" said lead MEP Sven Giegold (Greens/EFA, DE).
Undertakings for collective investments in transferable securities (UCITS), which gather assets from ordinary retail investors and pool them to buy bonds, shares or other financial products must be subject to stricter rules, to protect investors in them properly, said MEPs. UCITS control almost €6.3 trillion in funds.
The variable component of a fund manager's total salary should not exceed the fixed component salary and 50% of the variable remuneration should be paid in the units (assets) of the UCITS concerned, says the text.
Fund managers' pay should be always aligned with the investors' interests and the performance of the fund in question, it adds.
Assets and liabilities
Depositaries, which hold UCITS assets for safekeeping and ensure that their transactions comply with all applicable laws, must act independently and solely in the interest of the UCITS asset holders - they must not trade in UCITS assets on their own account, says the text.
The new rules would also make UCITS fund depositaries liable to UCITS and their asset holders for any loss of their assets, even if these assets were held in custody by a third party.
The European Parliament plenary will vote in April (tbc) on whether to give a mandate for three-party negotiations with EU member states and the European Commission.