Prudential Regulation Authority Rulebook

15A.1

This Chapter applies where:

1. (1) a firm agrees with an employee to pay or provide a buy-out;
2. (2) the buy-out relates to employment with, or provision of services to, a previous firm that was subject to the remuneration requirements; and
3. (3) the employee was a material risk taker in that previous firm.

15A.2

A firm may only award, pay or provide a buy-out to an employee if it enters into a contract with the employee which enables the firm, following receipt of a reduction notice, to:

1. (1) reduce all or part of the buy-out in accordance with 15.22(1)(a) and (c), (2) and (3); and
2. (2) recover all or part of the buy-out in accordance with 15.23.

15A.3

1. (1) A firm must ensure a buy-out aligns with the long term interests of the firm including appropriate retention, deferral, performance and clawback arrangements.
2. (2) The duration of retention, deferral, performance and clawback arrangements applied to a buy-out, or part of a buy-out, must be no shorter than such duration as was applied and remained outstanding in relation to unvested variable remuneration awarded by a previous firm to the person as an employee of that previous firm.

[Note: Art. 94(1)(i) of the CRD]

15A.4

1. (1) A firm must obtain remuneration statements from the employee before agreeing to provide the employee with a buy-out.
2. (2) The amount of a buy-out may be no greater than the aggregate amount of unvested variable remuneration referred to in the remuneration statements provided to the firm by the employee.

15A.5

1. (1) A firm must, in writing, inform a previous firm (“buy-out notice”):
1. (a) that it has entered into a contract which includes the terms required by 15A.2;
2. (b) of the amount attributable to unvested variable remuneration paid to the employee by that previous firm; and
3. (c) of the duration of retention, deferral, performance and clawback arrangements that would apply to the amount or part of the amount identified in (b).
2. (2) Where the buy-out does not include an amount attributable to unvested variable remuneration paid to the employee by a previous firm, (1) does not apply.

15A.6

On receipt of a reduction notice from a previous firm, the firm must reduce, or make all reasonable efforts to recover an amount corresponding to, the buy-out, in the amounts notified to it by the previous firm, before the vesting of the next relevant deferred payment, or in a case where clawback is applicable, within a reasonable period, and in any event, no later than the end of the applicable clawback periods in 15.20(3) and 15.20(4).

15A.7

1. (1) A previous firm must provide its employee or former employee with a statement (“remuneration statement”) containing the following information:
1. (a) all periods during which the employee was a material risk taker;
2. (b) the amount of unvested variable remuneration available to be bought out applicable to the periods during which the employee was a material risk taker; and
3. (c) the duration of retention, deferral, performance and clawback arrangements that the previous firm would apply to each amount or part of an amount identified in (b).
2. (2) The information in (1) must be provided to the employee or former employee within 14 working days of a request by that employee or former employee.

15A.8

1. (1) A previous firm which has received a buy-out notice must, in relation to that former employee, consider whether it would have reduced unvested variable remuneration or required the repayment of an amount corresponding to vested variable remuneration in accordance with the criteria it has set under 15.21 until the end of the last period contained in the remuneration statement it provided to that employee.
2. (2) Consideration of any reduction of unvested variable remuneration must only cover reductions for reasons contained in 15.22(1)(a) and (c).

15A.9

1. (1) The previous firm must determine the amounts by which it would have:
1. (a) reduced unvested variable remuneration; or
2. (b) required the repayment of an amount corresponding to vested variable remuneration
3. had the former employee remained in its employment or been providing services and the duration of retention, deferral, performance and clawback arrangements were as notified under 15A.5(c).
2. (2) The previous firm must make such determinations fairly and reasonably, including by:
1. (a) providing the former employee with details and reasons for the proposed determination;
2. (b) enabling the former employee to make representations as to why the proposed determination in (a) should not be made; and
3. (c) taking account of those representations in making the determination.
3. (3) The previous firm must, in writing, notify the firm and the employee of any amounts determined under (1) no later than 14 working days after it makes its final determination (“a reduction notice”).

15A.10

A firm must not:

1. (a) structure any element of an employee’s remuneration in a way that could result in remuneration which otherwise would be characterised as part of a buy-out, not being characterised as such; or
3. (b) act or fail to act in a way which would otherwise seek to avoid the requirements of this chapter.

15A.11

A contravention of 15A.9(2) by a firm is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to such actions for breach of statutory duty.