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Jul 5 2012 onwards

GEN 5.3.31 Guidance



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The definitive version of DFSA handbook text is the PDF version as that is the text of the instrument as made and published by the DFSA.

To view past versions of this module in PDF format, please visit the Archive.

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 PersonG . 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 BranchG or a subsidiary within a GroupG 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 BranchesG and GroupsG . For example, where an Authorised PersonG is a member of a GroupG , its Governing BodyG should consider whether the Group wide policies, such as those relating to the EmployeesG covered under the remuneration strategy and the disclosure relating to remuneration made at the GroupG 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 PersonG 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'sG business or structure, it may deviate from such best practice. The DFSAG will expect the Authorised PersonG 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 PersonG provides to the DFSAG relating to its remuneration structure and strategies should be included in the annual report or accounting statements. The DFSAG expects the annual report of Authorised PersonsG 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 BodyG ):
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 FunctionsG and any major risk taking EmployeesG .
5. The DFSAG may, pursuant to its supervisory powers, require additional information relating to the remuneration structure and strategy of an Authorised FirmG 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 DFSAG before being implemented. See Rule 11.10.20.
6. The information included in the annual report is made available to the DFSAG and the shareholders, and in the case of a listed company, to the public. The Governing BodyG of the Authorised PersonG 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 PersonsG 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]