The PRA’s consultation on buy-outs of variable remuneration |
The PRA is consulting on new rules governing the ‘buy-out’ of deferred bonus awards by new employers. The main proposals are:
- All buy-outs granted by a new employer are subject to malus and/or clawback in the same way as other types of variable remuneration;
- The new employer must operate malus and/or clawback on buy-outs if the former employer tells them to do so, because of misconduct or a failure of risk management at the former employer;
- The former employer must make a fair, reasonable and consistent determination about malus and/or clawback and give the employee and the new employer details and reasons for any proposed malus and/or clawback;
- Employees can make representations to the former employer which have to be considered before any determination. Employees will also be able to claim damages against the former employer for unfair, unreasonable or inconsistent determinations;
- New employers can ask the PRA for a waiver if they believe the former employer’s determination is unfair or unreasonable;
- Firms will be required to report cases of malus and/or clawback against bought-out awards at least annually.
These proposals will apply to all Material Risk Takers (MRTs) in Level 1 and Level 2 PRA-regulated firms, where the former employer is also PRA-regulated.
- All buy-outs granted by a new employer are subject to malus and/or clawback in the same way as other types of variable remuneration;
- The new employer must operate malus and/or clawback on buy-outs if the former employer tells them to do so, because of misconduct or a failure of risk management at the former employer;
- The former employer must make a fair, reasonable and consistent determination about malus and/or clawback and give the employee and the new employer details and reasons for any proposed malus and/or clawback;
- Employees can make representations to the former employer which have to be considered before any determination. Employees will also be able to claim damages against the former employer for unfair, unreasonable or inconsistent determinations;
- New employers can ask the PRA for a waiver if they believe the former employer’s determination is unfair or unreasonable;
- Firms will be required to report cases of malus and/or clawback against bought-out awards at least annually.
These proposals will apply to all Material Risk Takers (MRTs) in Level 1 and Level 2 PRA-regulated firms, where the former employer is also PRA-regulated.