The FCA has opened a consultation on proposed changes to remuneration rules for dual-regulated firms.

The consultation opened last Friday and runs until 9 June.

The regulator is considering changes to remuneration rules, “to ensure our remuneration rules for smaller, less complex dual-regulated firms are proportionate to the risks they pose to consumers and markets in the UK.”

In short, it plans to change the rules so it is easier to understand how firms remunerate their staff and align risk with reward.

It has proposed changes to its proportionality thresholds and also proposes to exempt firms meeting the updated proportionality thresholds from the requirements relating to malus and clawback. Malus and clawback is a legal term relating to the potential withholding or recovering of bonuses from managers if a material adverse event occurs after the award of performance-related pay.

It is also proposing some minor changes to the current rules to address some differences between the FCA Handbook and the PRA Rulebook.

The consultation applies to:   

• credit institutions (banks and building societies) 
• designated investment firms (those designated for prudential regulation by the PRA)  
• firms from overseas that carry on activities from an establishment in the UK that mean they would be a credit institution or designated investment firm if they were a UK domestic firm
• firms in the same group as at least 1 of the types of firm in the 3 categories above  

The watchdog said other investment firms, as well as trade bodies and firms’ professional advisers, may also be interested in the consultation, along with consumers and consumer organisations.

It said the changes it wants to make to the rules are “broadly consistent” with the changes proposed by the Prudential Regulation Authority (PRA) in its Consultation Paper Remuneration: Enhancing proportionality for small firms (CP5/23) published in February. Responses to that were requested by Tuesday 30 May.