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  • GEN 5.3.31 GEN 5.3.31

    (1) The Governing Body of an Authorised Person must ensure that the remuneration structure and strategy of the firm:
    (a) are consistent with the business objectives and strategies and the identified risk parameters within which the firm's business is to be conducted;
    (b) provide for effective alignment of risk outcomes and the roles and functions of the Employees, taking account of:
    (i) the nature of the roles and functions of the relevant Employees; and
    (ii) whether the actions of the Employees may expose the firm to unacceptable financial, reputational and other risks;
    (c) at a minimum, include the members of its Governing Body, the senior management, Persons Undertaking Key Control Functions and any major risk-taking Employees; and
    (d) are implemented and monitored to ensure that they operate, on an on-going basis, effectively and as intended.
    (2) The Governing Body must provide to the DFSA and relevant stakeholders sufficient information about its remuneration structure and strategies to demonstrate that such structure and strategies meet the requirements in (1) on an on-going basis.
    (3) For the purposes of this Rule, "major risk-taking Employees" are Employees whose actions have a material impact on the risk exposure of the Authorised Person.
    [Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]

    • GEN 5.3.31 Guidance

      Proportionate application to firms depending on the nature of their business

      1. Those considerations set out in Guidance items 5 – 7 under Rule 5.3.30 apply equally to the way in which the remuneration structure and strategies related requirement in Rule 5.3.31 is designed to apply to an Authorised Person. Accordingly, whilst most Category 4 firms may have simple arrangements to achieve the outcome of aligning performance outcomes and risks associated with remuneration structure and strategies, banks, insurers and dealers are expected to have more stringent measures to address such risks.

      Application to Branches and Groups

      2. As part of the flexible and proportionate application of corporate governance standards to firms, whether a firm is a Branch or a subsidiary within a Group is also taken into account. As such, the considerations noted in Guidance items 8 – 9 under Rule 5.3.30 apply equally to the application of the remuneration related requirements for Branches and Groups. For example, where an Authorised Person is a member of a Group, its Governing Body should consider whether the Group wide policies, such as those relating to the Employees covered under the remuneration strategy and the disclosure relating to remuneration made at the Group level are adequate to meet its obligations under Rule 5.3.31.

      Best practice relating to corporate governance

      3. In addition to the considerations noted above, best practice that an Authorised Person may adopt to promote sound remuneration structure and strategies within the firm is set out as Guidance at Appendix 3.2. Where such best practice or any aspects thereof are not suited to a particular Authorised Person's business or structure, it may deviate from such best practice. The DFSA will expect the Authorised Person to demonstrate, upon request, what the deviations are and why such deviations are considered appropriate.

      Disclosure of information relating to remuneration structure and strategy

      4. The information which an Authorised Person provides to the DFSA relating to its remuneration structure and strategies should be included in the annual report or accounting statements. The DFSA expects the annual report of Authorised Persons to include, at a minimum, information relating to:
      a. the decision making process used to determine the firm-wide remuneration policy (such as by a remuneration committee or an external consultant if any, or by the Governing Body):
      b. the most important elements of its remuneration structure (such as, in the case of performance based remuneration, the link between pay and performance and the relevant assessment criteria); and
      c. aggregate quantitative information on remuneration of its Governing Body, the senior management, Persons Undertaking Key Control Functions and any major risk taking Employees.
      5. The DFSA may, pursuant to its supervisory powers, require additional information relating to the remuneration structure and strategy of an Authorised Firm to assess whether the general elements relating to remuneration under Rule 5.3.31(1) are met by the firm. Any significant changes to the remuneration structure and strategy should also be notified to the DFSA before being implemented. See Rule 11.10.20.
      6. The information included in the annual report is made available to the DFSA and the shareholders, and in the case of a listed company, to the public. The Governing Body of the Authorised Person should also consider what additional information should be included in the annual report. In the case of banks, insurers and dealers, more detailed disclosure of remuneration structure and strategy and its impact on the financial soundness of the firm would be required. When providing disclosure relating to remuneration in its annual report, Authorised Persons should take account of the legal obligations that apply to the firm including the confidentiality of information obligations.
      [Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]