Fund Manager Bonus Curbs Lead to Split Before EU Vote
By Jim Brunsden - Jun 28, 2013 3:49 AM ET
European Parliament lawmakers will vote next week on rules to curb fund manager bonuses, amid a split within the assembly over how far the EU should go in regulating pay.
The plans, which would ban managers of so-called UCITS funds from receiving bonuses worth more than their fixed pay, were narrowly adopted earlier this year by the parliament’s economic and monetary affairs committee. The vote will pit Christian Democrats, Conservatives and Liberals against Socialists and Greens in a tally that lawmakers say is too close to call because some parties face internal schisms.
The draft rules for fund managers go beyond planned EU curbs on banker pay that would allow bonuses of twice fixed salary. Photographer: Chris Ratcliffe/Bloomberg
“It’s now time to see whether the parliament wants to take a stand against the bonus culture in financial services and with the investor,” Sven Giegold, the Green group lawmaker leading work on the bill, said in a telephone interview. “We are one year out from elections and the citizen will be able to see where their representatives stand.”
The draft rules for fund managers go beyond planned EU curbs on banker pay that would allow bonuses of twice fixed salary. European asset-management firms are concerned the proposal, which may affect two-thirds of senior fund managers, will lead to a bidding war for their top traders, increasing fixed costs and making the industry more vulnerable to market downturns.
Parliament is weighing whether to add the bonus rules, as well as curbs on payment of performance fees, to a draft law proposed by Michel Barnier, the EU’s financial services chief, to toughen UCITS regulation. The draft law must be approved by the parliament and national governments before it can take effect.
Legislators are set to debate the plans on July 2, before voting the following day.
UCITS, or Undertakings for Collective Investment in Transferable Securities, had more than 6 trillion euros ($7.8 trillion) under management as of April 2012, according to the European Commission. The funds are regulated at EU level and have the right to operate throughout the 27-nation bloc if they meet minimum oversight and investor-protection standards.
Lawmakers from the parliament’s Christian Democrat, Conservative and Liberal groups are seeking support in the assembly for an amendment to scrap the bonus cap in favor of less prescriptive requirements linking pay to performance, according to the parliament’s website.
“Getting the bonus cap out of the Parliament’s text has always been my priority,” Syed Kamall, a U.K. Conservative lawmaker representing London in the EU Parliament, and one of the sponsors of the amendment, said in an e-mail. “The notion that you can tackle systemic risk by introducing an arbitrary limit on asset managers’ pay is absurd.”
While the three groups combined account for slightly more than half of the assembly’s 753 members, that isn’t necessarily an accurate guide to whether the amendment will pass, owing to the potential for splits — which also occurred during the committee vote in March.
Parliament’s Socialist, Green, and far-left groups account for slightly more than a third of the assembly.
“It is a shame that a reasonable agreement could not be found with the Greens and the Socialists,” Kamall said. “It has always been ideological for them, and so that is why I negotiated a compromise with the Liberals and center-right groups.”
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