The European Parliament (EP) has voted against proposals for imposing a strict bonus cap for retail fund managers, despite some members (MEPs) campaigning for the rule in an effort to follow up curbs on bankers’ pay.
The plan was defeated by 348 votes to 314 and the Parliament suggested instead that fund managers should get a higher proportion of their bonuses in shares in the fund, as well as deferring part of the payment.
Sven Giegold, a German MEP who lobbied to limit the cash bonus paid to fund managers, described the vote as ‘a dark day’ for investor protection. “A comprehensive change of the culture in the financial industry has been forestalled,” he said.
The ruling was seen as a victory for European fund managers and the City of London financial district, but the industry is likely to receive further pressure for transparency, especially regarding fees charged to customers. However, legislators proved reluctant to rule so strictly on fund managers, whose role as guardian of pension funds is seen as posing far less threat to financial stability.
Sharon Bowles, a British MEP, said: “I do not think it is appropriate to roll out the same bonus cap across all financial services legislation.”
The new rules proposed by the EP, which must first be agreed by all member states, will affect the managers of mutual funds, which have about €6 trillion under management, but will not apply to hedge funds or private equity.
The Investment Management Association (IMA), representing asset managers running more than £4 trillion in funds, welcomed the parliament's proposals for multi-year deferral of windfalls for managers, enabling a clawback of pay-outs if investments turn sour. However, some investors said the EP had missed a chance to demand greater clarity about what fund managers are charging their customers.