More On Legal & Compliancefrom The Advisor's Professional Library
- The Custody Rule and its Ramifications When an RIA takes custody of a clients funds or securities, risk to that individual increases dramatically. Rule 206(4)-2 under the Investment Advisers Act (better known as the Custody Rule), was passed to protect clients from unscrupulous investors.
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
The European Union will consider whether to impose absolute caps on banker bonuses and restrict them to between three and five times salary, including stock options, though the U.K. is not expected to support such a measure.
Reuters reported Sunday that an EU official said the measure was to be discussed on Monday at a meeting of EU diplomats and lawmakers, as well as a proposal to limit only the cash bonus bankers receive to no more than their salary.
Britain’s Finance Minister George Osborne, who has been outspoken in his efforts to preserve the London’s financial primacy in Europe, is expected to oppose the measure and has already said he would fight any bonus caps proposed by Brussels.
Substantial progress on limiting the pay of bankers has not been made despite the fallout from the financial meltdown of 2008-2009. Despite the crisis and a wave of subsequent financial misdeeds, from LIBOR rigging to massive losses in risky trades, opposition from banks has alleged that such limits would cost them their most talented staff.
The proposal to be discussed Monday would apply an automatic cap of three times salary to bonuses, although an official was quoted saying, "Shareholders could decide to go for five times." Another official said in the report, "There should be a final push so that there is a political agreement at the meeting of finance ministers on December 4." He added that changes to any cap were still possible.
While present EU rules already compel banks to defer up to half the bonus for at least three years, and the EU’s restrictions on bank pay are already tighter than the guidelines from the G20, some countries, such as Germany, want to tighten them still more. The European Parliament is in favor of restricting all the elements of a bonus to total no more than a banker’s basic salary.