Hedge Funds EU Bonus
Hedge Funds May Face Bonus Restrictions by EU
Hedge funds are facing another problem with European Union regulation. The EU is due to pass new bank bonus restrictions that will be applied to hedge funds as well. The new rule requires that cash can only be 30 percent of a regular bonus and a fifth of a large bonus.
It looks like the hedge fund industry will have to brace itself for yet another regulatory headache: Europe’s new bonus restrictions.
Hedge fund managers will be subject to planned bank bonus rules expected to be approved by the European Parliament next week, FINalternatives reported. Funds have been caught up in the new directive because management companies are considered to be credit institutions under the rules, Hedge Funds Review noted.
Under the terms of the proposal, cash could only constitute 30 percent of a regular bonus and one-fifth of a large bonus. A new watchdog for European banks will define what constitutes a large bonus. Companies will also have to defer at least 40 percent of bonus payments for a period of at least three years.
However, hedge funds may have a hard time complying with the rules, given that most are not publicly-listed and therefor, unlike banks, cannot make up the rest of the bonus payments in stock. Source
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