Remuneration in securities institutions – two legal sources to consider

The Securities Institutions Remuneration Ordinance (Wertpapierinstituts-Vergütungsverordnung – WpIVergV) was promulgated in the Federal Law Gazette (BGBl. 2024 I No. 5) on 11 January 2024 and entered into force on 12 January 2024.

After the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) published an initial draft for consultation on 4 May 2021 and an updated version on 19 October 2022, the final version of the regulations provided for in Section 46 (3) of the German Securities Institutions Act (Wertpapierinstitutsgesetz – WpIG) has now been published following further revision.

The requirements for remuneration systems of securities institutions are only rudimentarily regulated in Section 46 (1) WpIG. As the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – IVV), which applies to other credit and financial services institutions, isn’t applicable to securities institutions, the concretisation of the regulatory requirements for the structuring of remuneration is of considerable importance in practice. The regulations of the WpIVergV apply to around 70 medium-sized securities institutions in Germany.

The updated version of BaFin Circular 05/2018 on the minimum requirements for the compliance function and other conduct, organisation and transparency obligations (Mindestanforderungen an die Compliance-Funktion und weitere Verhaltens-, Organisations- und Transparenzpflichten - MaComp) published on 28 February 2024 contains revised regulations on the remuneration systems of investment service providers (Wertpapierdienstleistungsunternehmen – WPDU) in connection with the provision of investment services in module BT8.

By updating BT8 MaComp 2024, BaFin is incorporating the updated guidelines on MiFID II remuneration requirements published by ESMA on 31 March 2022 into its administrative practice. With effect from 28 February 2024, BT8 MaComp 2024 replaced the previous regulation in force since the last revision in May 2023.

From a supervisory perspective, BT8 MaComp and the ESMA Guideline specify the general requirements set out in Art. 27 and 34 of Commission Delegated Regulation 2017/565 in conjunction with Art. 23 para. 4 of the Directive 2014/65/EU (MiFID II) and in Sections 63 para. 3, 80 para. 1 sentence 2 no. 2, 81 para. 2 sentence 2 no. 3 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) for sufficient consideration of customer interests in the content of the remuneration systems and the corresponding assurance that they’re not impaired by the remuneration systems.

The MaComp is an administrative regulation interpreting standards and not a substantive law. But they still have to be observed by those applying the law, as they’re de facto legally binding (to a certain extent) through BaFin’s self-binding nature as so-called soft law.

Find out which details are changing and what the ratio is between the two sets of rules in the “Vergütung in Wertpapierinstituten” podcast in the Financial Market Compliance series “Finanzmarkt Compliance”.