The Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) has published a summary note of a roundtable on compensation practices in the securities sector that took place on 13 December 2016.
The roundtable discussions were focused on compensation and related governance and risk management issues. The roundtable, which was designed as a fact-finding exercise, helped to exchange views on similarities and differences in firms’ approaches to compensation issues in the securities sector. Highlights included in the summary relate to:
- the design and governance of the compensation practices of securities firms;
- the potential risks that can emerge from compensation structures, and whether, and how, securities firms should align their compensation practices with long-term prudent risk taking. Roundtable participants also discussed the type of securities market activities undertaken, and risks that might emerge from these activities where compensation could play a role;
- how oversight of misconduct risk is organised within firms in the securities sector to help reduce incentives for misconduct, which can be detrimental to public trust and confidence in the financial system, and also to investor protection; and
- regulatory provisions or restrictions related to compensation in the securities sector, particularly the differences and commonalities between the securities and banking sectors. Roundtable participants noted that banking rules should not be applied to securities firms, since their business model is substantially different to banks.
Roundtable findings will inform the 2017 FSB progress report on compensation practices, which will be published ahead of the G-20 Leaders’ Hamburg Summit in July 2017. The FSB and IOSCO welcome any feedback on the topics discussed by 15 May 2017.
View FSB and IOSCO summary of roundtables on compensation practices in securities sector, 6 April 2017