Do any specialist regulatory regimes apply to incentive plans?
Companies in the financial services industry must be mindful of reproposed regulations issued under Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) which would (i) prohibit incentive plans that regulators deem to encourage inappropriate risk-taking by certain large financial institutions by providing excessive compensation or that could lead to material financial loss, and (ii) require those financial institutions to disclose information concerning incentive compensation plans to regulators.
No, there are no special regulatory regimes applicable to incentive plans.
Please see answer to question 13 above.
As mentioned, there are certain mandatory limits in Financial Institutions on the offering of incentive plans.
Otherwise, see question 9 and 10.
There are no specialist regulatory regimes in Ecuador that apply to incentive plans.
A. Industrial regulations
- Main board information disclosure business Memorandum No. 3 – Share incentive and employee stock holding plan
- Small and Medium Enterprise Board information disclosure business Memorandum No. 4 – Share incentive
- Growth Enterprise board information disclosure business Memorandum No. 8 – Share incentive plan
- Growth Enterprise board information disclosure business Memorandum No. 20 – Employee share holding plan
- Growth Enterprise board information disclosure business Memorandum No. 8 – Share incentive plan
- Shanghai Stock Exchange Notice on matters regarding Share incentive plan stock option exercise
- Business Memorandum of Information Disclosure Issued by Shenzhen Stock Exchange No. 8 - Registration for Granting of Equity Incentive Stock Option
- Business Memorandum of Information Disclosure Issued by Shenzhen Stock Exchange No. 9 - Confirmation for Exercise of Equity Incentive Stock Option
B. State-owned companies regulations
- Opinions on the Implementation of the Pilot Employee Stock Ownership Program by State-controlled Mixed Ownership Enterprises
- Interim Measures for Equity and Dividend Incentives of State-Owned Technological Enterprises
- Guiding Opinions on Pilot Programs of Equity-based Incentives for State-owned High-tech Enterprises
- Opinion on regulating State-owned company employee shareholding and investment
Other than the securities laws described under question 13 above, there is no specific national regulatory regime regarding incentive plans in the Netherlands.
If there is a financial undertaking (financiële onderneming) with its registered seat in the Netherlands within the group, it should be checked whether additional remuneration rules apply, which may restrict the possibility to offer awards to employees and conditions thereof.
Financial institutions and similar entities are subject to specific rules, which stipulate that at least 50 per cent of variable compensation must be paid in shares or share-based instruments, compatible with the creation of long-term targets and the acceptable time frame for risk.
These rules apply to financial institutions and other institutions authorised to operate by the Central Bank of Brazil, except for credit unions and entities lending to micro and small businesses, managers of purchasing consortiums and payment institutions. They apply only to administrators and executive officers, and the Central Bank of Brazil is in charge of implementing and overseeing them.
There are no specialist regulatory regimes applicable to incentive plans. The operation of incentive plans is regulated by internal policies which are stipulated by individual corporations and they normally take into account the qualification of specialist as a positive criterion; e.g., obtaining the qualification of CPA affects the benefits in incentive plans but there is no regulation on the operation of incentive plan arising from a specialist regulatory regime.
Financial institutions shall comply with the rules set out in the Norwegian Act on Financial institutions and Financial Groups chapter 15 and affiliated regulations. The board of directors shall determine and ensure that the company at all times has and practices a remuneration plan that will apply to the company and its subsidiaries. The remuneration plan must contain rules for executive employees, for other employees and employee representatives with tasks that are of great importance to the company’s risk exposure and for other employees and employee representatives with equivalent incentive plans, as well as employees and employee representatives with tasks related to controlling.
Remuneration includes payment in kind, bonuses, allocation of shares, subscription rights, option or other forms of remunerations linked to shares or the development of the share price of the company or of other companies within the same group of companies, as well as pension schemes, severance pay arrangements and any form og variable element in the remuneration, or special remuneration in addition to the basic salary. The regulation to the Norwegian Act on Financial institutions and financial Groups includes comprehensive provisions with regard to salary regimes (including incentive plans) for key personnel in financial institutions. Not to limit the importance of all aspect of the regulation, we emphasize that any variable remuneration must not exceed 100 % (up to 200 % if certain criteria are met) of the base salary. Please also note that specific rules applies as to the content of any incentive plan, i.a. must at least 50 % of any variable remuneration be based on shares (or similar equity instruments) in the financial institution in question.
The company shall conduct a review of the incentive plans at least once a year, and a written report shall be prepared. The report shall be reviewed by independent control functions. If required by the Norwegian Financial Supervisory Authority, the report shall be presented.
Companies operating incentive plans need to take a number of issues into account ensuring compliance with (i) financial services laws in respect of regulated activities and financial promotions; (ii) company law, listing rules and market abuse legislation, (iv) employment and discrimination legislation and (v) consumer rights and consumer credit laws. Also, companies operating within the financial services sector have additional regulatory regimes that need to be complied with.
The legal obligations and restrictions are exempted in cases, in which shares or options are granted to employees or board members. The further requirements are:
- The issuing company has his headquarters in a member state of the European Economic Area (EEA), the shares are being offered publicly, and shares of the issuing company have already been admitted to trading at a EU or EEA stock exchange, or – under certain specific additional conditions – at a stock exchange outside of the EU (Section 4 (1), No 5 German Securities Prospectus Act).
- The issuing company is seeking admission for trading. Moreover, the shares are of the identical class as any other shares of the issuing company that are already admitted to trading on the same EU or EEA stock exchange (Section 4 (2) No. 6 German Securities Prospectus Act)
Furthermore a prospectus is not required under the following conditions (Section 3 (2) German Securities Prospectus Act):
- Less than 150 employees are participating
- The cumulated price of all shares granted in the EEA is below EUR 100,000 within the period of 12 months.
There is no specialist regulatory regime on incentive plans.
Nevertheless, as mentioned above (see question 12), some specific organization that have authority in that matter (such as the Financial Markets Authority (“AMF”) issued guidelines on these specific matters, which are regularly updated.
In addition, for companies whose securities are admitted to trading on a regulated market, the AFEP-MEDEF Code provides for some recommendations that applies to incentive plans offered to company officers.
In Spain there are specific regulations in relation to the remuneration of employees or directors of financial institutions, banks, investment services companies, collective investment institution managers and alternative investment managers. This regulation stems from the transposition of European Community standards into Spanish law.
There are special rules applicable to the financial sector that could impact in stock options plans and other incentive schemes.
Portugal has implemented the EU regulations and the European Banking Authority orientations on remuneration on the financial sector, which cover remuneration of the members of the board and also staff members whose professional activities have material impact on the institutions' risk profile. In these cases, it is necessary to implement specific remuneration policies that must follow certain guidelines and are subject to some restrictions, in particular regarding variable remuneration (see EU Overview chapter).
There are also specific rules on remuneration of Directors and management board members of companies owned or controlled by the government, although executives under employment contracts are not covered by those rules.
In addition to the requirements referred to above in point 13, Consob may, by means of its own regulations, provide that more detailed information be given relative to plans of particular importance.
When Consob put into practice art. 114 bis of the TUF, it stated that in order to provide overall information on the data on stock options, as well as to highlight the evolution over time of the plans themselves and the burden, for the shareholders of the company, resulting from the dilution of the value of the shares held recommends that at least the following information be included in the report on operations of the financial statements for the year:
(a) an indication of the stock option plans adopted or still in effect during the year and the reasons for adopting such plans;
b) a brief description of the characteristics of each "plan", an indication of the amount of the shares for which the offer is pending (including in percentage of the share capital), the beneficiaries, the duration and the methods of allocation and exercise;
c) indication of any transactions carried out for the purchase or subscription of shares pursuant to Article 2358 of the Italian Civil Code, with evidence that allows easy reconciliation with the financial statements data relating to any loans and guarantees given.
In the case of "plans" of particular significance (in relation, for example, to the percentage of capital involved or the total value of the options assigned), it is also recommended to indicate:
(d) data on the evolution of the 'plans', indicating the rights (options):
d.1 - granted and vested at the beginning and end of the financial year;
d.2 - attributed;
d.3 - exercised; e:
d.4 - expired during the year.
It is also required to indicate the weighted average prices for these items and the average market prices, in order to allow the measurement of the overall benefit enjoyed by the assignees and the latent benefit at the end of the year.
There is not any specialist regulatory regime to supervise the application of such incentive plans other than conditions referred regarding equity based benefits provided by publicly held companies.