On 17 December 2020, the European Banking Authority (EBA) issued a consultation paper containing draft guidelines on remuneration for investment firms as defined in Article 4(1)(1) of MiFID II that do not meet all of the conditions for qualifying as small and non-interconnected investment firms under Article 12(1) of the Investment Firm Regulation (IFR) and Member State competent authorities. For investment firms the draft guidelines will apply on an individual basis in accordance with Article 25 of the Investment Firm Directive (IFD) and Article 7 of the IFR and unless Article 8 of the IFR is applied by Member State competent authorities, on a consolidated basis.

The EBA has already published guidelines on remuneration policies in 2015 that are applicable to credit institutions and investment firms. These guidelines form the basis of the draft guidelines now published and to a large extent are aligned to ensure a level playing field and cross sectoral consistency. The draft guidelines are based on Article 16 of EBA founding Regulation and Articles 26, 32 and 34 of the IFD.  Article 26 of the IFD requires that investment firms have robust governance arrangements, including remuneration policies and practices that are gender neutral and that are consistent with and promote sound and effective risk management.

The deadline for comments on the consultation paper is 17 March 2020.