Public. Remuneration Policy. Nasdaq Broker Services AB. 5 December Policy Owner: Compliance Officer

Transcription

1 Remuneration Policy Nasdaq Broker Services AB 5 December 2017 Policy Owner: Compliance Officer 1

2 Table of Contents 1. SCOPE OF APPLICATION 3 2. OBJECTIVE 3 3. CORE ELEMENTS OF THE GLOBAL POLICY 4 4. POSITIONS THAT MAY AFFECT THE COMPANY S RISK EXPOSURE 5 5. REMUNERATION 5 6. GOVERNANCE AND CONTROL 7 7. DISCLOSURE OF INFORMATION ON REMUNERATION 7 2

3 1. SCOPE OF APPLICATION This Remuneration Policy (hereinafter referred to as ( Policy ) 1 supplements the Nasdaq Inc. global remuneration policy/compensation Package (hereinafter referred to as Global Policy ) and constitutes a general policy applicable for all associates within Nasdaq Broker Services AB (hereinafter referred to as Broker Services, or as the context indicates as Company ). This Policy is designed in such a way as to not create a conflict of interest or incentive that may lead relevant persons to favour their own interests or the Company s interest to the potential detriment of any client. In addition to the Global Policy (see Section 4 below) this Policy is applicable to all associates within Broker Services. However, this Policy sets forth some further restrictions in the remuneration with regard to associates belonging to such a personnel category in Broker Services who may, as part of his/her assignment, perform material influence on Company s risk exposure (hereinafter referred to as Risk Takers 2 ). The applicability of the remuneration principles with respect to the aforementioned personnel category is described in more detail below. Further, Broker Services shall, to the extent appropriate, make the assessment that consultants, or other persons working or performing actions to Broker Services, and this person being employed by a third party or being an independent entrepreneur, may be subject to the scope of application of this Policy. The Compliance Officer shall initiate the review process of the Policy and also include other relevant stakeholders in the process, such as the Human Resources department, and update the Policy at least on an annual basis. This Policy shall be reviewed at least on an annual basis and approved, by the Board of Directors (the Board ) of Broker Services, after taking advice by the Compliance function. The CEO shall be responsible for the day-to-day implementation of the Policy and the monitoring of compliance risks related to the Policy. The Remuneration Policy and practices shall apply to all relevant persons with an impact, directly or indirectly, on investment and ancillary services provided by the Company or on its corporate behaviour, regardless of the type of clients, to the extent that the remuneration of such persons and similar incentives may create a conflict of interest that encourages them to act against the interests of any of the Company s clients. 2. OBJECTIVE The objective with this Remuneration Policy is to have a competitive and fair approach for all associates within Broker Services, allowing the recruitment and retention of qualified and experienced personnel. Further, the purpose of this Policy is to promote effective risk management and to encourage risk-taking being in line with the Company s long-term 1 This Policy is set up to meet the Swedish regulations issued by the Financial Supervisory Authority s, (Sw. Finansinspektionen) Regulations and General Guidelines (FFFS 2011:1 [as amended by FFFS 2014:22]) (hereinafter referred to as the Regulations ), the Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile ( RTS ) and Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2017/65/EU ( MiFID II Delegated Regulation), in particular Article Risk Takers shall have the same meaning as set forth in FFFS 2011:1 (as amended. 3

4 interests. The Global Policy describes our philosophy and the three major remuneration components annual base salary, annual performance-based cash incentive awards and longterm stock-based compensation (i.e., equity awards). 3. CORE ELEMENTS OF THE GLOBAL POLICY 3.1. General Philosophy The remuneration principles laid down in this Policy are based on the core philosophy of the Global Policy applicable for the Nasdaq Inc. group. To uphold independency in the compensation decisions, the Management Compensation Committee, designated by the Board of Directors of the Nasdaq Group Inc., issues the Global Policy and sets the core philosophy for associate s compensation levels. The core philosophy of Nasdaq Inc. group s Global Policy is based on reward for performance, aligning compensation with corporate goals and objectives, rewarding outstanding service and maintaining compliance with each country s laws, regulations and market practices. Further, each associate s variable remuneration is, according to the Global Policy, evaluated by the overall parent company or subsidiary objectives and business unit/department objectives as well as individual objectives. The Management Compensation Committee has endeavoured to create a performance-based compensation program that meets the needs of our global company and recognizes the important responsibilities to our stockholders. Accordingly, the compensation mix focuses on short-term (cash based compensation) and long-term (equity based compensation) financial performance of our company. Nasdaq Inc. group strives to offer associates a competitive balance between the fixed and variable components in order to attract motivated persons and retain skilled individual associates. Consequently, the variable remuneration is capped according to Nasdaq Inc. s Global Policy. For all associates the variable remuneration, both short-term and long-term, is expressed as a percentage of base salary. Such a cap promotes in Nasdaq Inc. s opinion the balance between the variable and fixed remuneration and appropriate risk taking Long-term perspective According to the Global Policy, the total compensation mix to individual associates aims to encourage taking appropriate risks in order to improve Nasdaq Inc. s long-term performance and build a long term shareholder value. The compensation program is subject to a comprehensive risk assessment process that is intended to identify any areas of the compensation structure that may intentionally encourage inappropriate risk taking. Such a risk assessment aims to prevent that Nasdaq Inc. group s total remuneration for a given period of time does not expose its ability to achieve a positive result over the life time of a business cycle. Accordingly, the actual costs for maintaining adequate capital and liquidity that are inherent to the business operations are taken into account in such performance measurement. In order to discourage excessive risk taking within Nasdaq Inc. group, some positions/functions within the Nasdaq group are not according to the Global Policy permitted to have any revenue related goal in their cash based variable compensation scheme nor as a performance measure for the long-term incentive program (equity based). 3 Such exclusion of the revenue related goal with respect of associates within control functions (e.g. risk, 3 The list of the individual associates belonging to such category, as they are from time to time, is maintained by the Human Resources department of the Company. 4

5 compliance and internal audit) contributes to independency of business areas and goals that they are reviewing. In addition, where necessary, due to material errors, omissions, fraud, or misconduct of an associate, reimbursement for any compensation deferred to any such associate may be sought. Moreover, the remuneration principles according to the Global Policy do not allow any guaranteed variable remuneration Grandfather Principle Within the Nasdaq Inc. group, all decisions that are in any way linked to compensation and performance evaluations are governed by a principle called the Grandfather Principle. The Grandfather Principle means that any decision being made by the immediate manager is also always reviewed and approved by the manager s manager. Such decisions include setting and evaluating individual goals, all changes in compensation, and all variable remuneration payouts. Further, the Global Policy states that it is the Management Compensation Committee of the Board of Directors of Nasdaq Inc. that shall decide on and prepare remuneration decisions for the senior executives. Nasdaq believes that this level of governance actively counterstrike excessive risk taking. 4. POSITIONS THAT MAY AFFECT THE COMPANY S RISK EXPOSURE According to the Regulations, a company s remuneration policy shall define Risk Takers, whose influence have or is deemed to have a material impact on the company s operations. Operational, reputational and legal risks are deemed as typical risk categories in Broker Services business operations. Consequently, the Risk Takers in Broker Services typically consist of the Chief Executive Officers, as well as senior managerial level positions reporting directly to the Board of Directors of Broker Services respectively, as well as positions within compliance, regulatory, and risk management. Risk Takers shall also be identified in accordance with Appendix 1. Furthermore, where employees in control functions (Risk, Compliance and Internal Audit) receive variable remuneration, Broker Services shall ensure that this remuneration is based on targets linked to the control function itself and is independent of the performance of the business areas they control. The Human Resources ( HR ) department shall assess and recommend to the Board of Directors of each company (the Board ) the associates who in their opinion should be regarded as Risk Takers, as they are from time to time, considering the risks that the Companies may be subject to. The assessment shall be made in co-operation with the person appointed as remuneration responsible and the Compliance function. The assessment will be performed each year, or more frequently if necessary, and be presented to the Board, which can accept or reject the recommendations made and can by its sole discretion regard other employees as Risk Takers. The HR department will maintain and uphold the list of Risk Takers and shall ensure that these staff are notified and understand the implications of this status. 5. REMUNERATION 5.1. Fixed Salary 5

6 The fixed salary shall be competitive and based on the individual s responsibilities and performance Total Variable Remuneration The total variable remuneration according to Nasdaq Inc. group s Global Policy consists of the combination of the annual actual paid cash and granted long-term incentive equity award. The granted long-term incentive equity award will automatically be forfeited in connection with an associate s resignation. The Equity Incentive Plan consists of three vehicles that reward long-term success and growth: (1) Performance Share Units ( PSU three year); (2) Performance Share Units (PSU one year); and (3) Restricted Stock Units ( RSU ). Those with greater responsibility for long-term company performance will have incentives more heavily weighted toward PSUs with either three year Cliff Vesting (PSU 3 year) or 1/3 vesting per year (PSU one year), while those with less direct impact on company results will have incentives more heavily weighted toward RSUs. The RSUs have since 2014 a vesting scheme, of which 25% vest after 2 years, 25% after 3 years and 50% after 4 years. Such awards are capable of being clawed-back in the event of poor financial performance of personal conduct. All Nasdaq Inc. group employees are eligible to participate in the Global Compensation Program. The variable remuneration is set as a target percentage of the annual fixed salary. The balance between the variable remuneration and fixed salary is reviewed on an annual basis by Nasdaq Broker Services to ensure that the balance of fixed and variable remuneration is appropriate on an individual basis. The level of the variable remuneration is differentiated based on employees positions within the company. The total variable remuneration consists of the short term incentive program, Corporate Incentive Plan (CIP), and the long term equity incentive program Risk Takers within Broker Services Staff whose professional activities have a material impact on an institution's risk profile ( MRT ) 4 with a total variable remuneration equal to or exceeding SEK , shall have the remuneration deferred with 40 % for a minimum of three to five years before the remuneration is paid out or the ownership is transferred to the MRT. Total variable remuneration of the executive management 5 and a MRT with an especially high variable remuneration 6 shall be deferred with 60%. Maximum variable remuneration for identified risk takers and MRT shall in no event exceed 100 % of their fixed salary. Deferred remuneration can be paid out once a year pro rata and the first payment can be paid out one year after the total variable remuneration was determined. Further, the deferred payment for an individual associate mentioned above may be cancelled in part or in whole, if at a later stage, in connection with the end of the deferral period, it is demonstrated that Broker Services did not fulfill the performance criteria designated for it. 4 Sw anställda vars arbetsuppgifter har en väsentlig inverkan på företagets riskprofil as set forth in FFFS 2011:1 (as amended). 5 Executive management shall have the same meaning as set forth in FFFS 2011:1 (as amended). 6 This also applies to employees with a total variable remuneration equal to the total variable remuneration of the executive management. 6

7 Such a cancellation shall be applied only if the Company s financial stability is significantly weakened, whereby the Company no longer is considered to be able to continue conducting business. Staff engaged in risk management, compliance and internal audit functions shall be remunerated in a manner that is independent of the business performance of Broker Services and the business areas within the company Approval on Total Remuneration Both the fixed salary and the total variable remuneration for identified Risk Takers of Broker Services should, on an annual basis or when significant changes occur, be reviewed and approved by the Board of Directors of the Company. Such approval should be duly documented and kept in line with the Regulations and this Policy. 6. GOVERNANCE AND CONTROL This Policy and the defining of the scope of Risk Takers are subject to approval by the Board of Directors. Further, the Board of Directors shall be responsible for the application and follow up of the Policy. Broker Services has appointed a person responsible for performing an independent judgment of this Policy and its remuneration system. The appointed person is also responsible for the preparation of decisions for the Board of Directors to resolve upon, inter alia, the remuneration to the executive management, certain employees and actions for follow-up and application of the Policy. The Regulations stipulate that an independent control function shall, on an annual basis, monitor that the remuneration applied by the Company is in compliance with this Policy. The control function shall be independent of the business units they are monitoring, have appropriate authorizations and resources and receive remuneration independent of the business areas they are reviewing. Based on the above, the Company shall engage its Compliance function to carry out the control of the Policy referred to above, if appropriate by commissioning the external auditors. When needed, the control function shall immediately report the results of its review to the Board of Directors at least annually and no later than in conjunction with the adoption of the annual accounts. 7. DISCLOSURE OF INFORMATION ON REMUNERATION An account of the Company s remuneration shall be disclosed in conjunction with the adoption of the annual report in accordance with the applicable Regulations. The Company shall present its account in the annual report, in an appendix to the annual report or on its website. If the account is not included in or appended to the annual report, the Company shall disclose in its annual report where the information is published. The information should be published in such a manner that the economic conditions for individual associates are not revealed. The account shall be available for at least one year after its publication. 7

8 Information about performed risk analysis shall be disclosed on Nasdaq s website or in the annual report. 8

9 Appendix 1 Definition of Risk Takers Associates belonging to such a personnel category in Nasdaq Broker Services AB who may, as part of his/her assignment, perform material influence on Company s risk exposure are considered as Risk Takers. In addition, all the categories of staff identified by any criteria below are considered as staff whose professional activities have a material impact on an institution's risk profile. Qualitative criteria Staff shall be deemed to have a material impact on an institution s risk profile where any of the following qualitative criteria are met: (1) the staff member is a member of the management body in its management function; (2) the staff member is a member of the management body in its supervisory function; (3) the staff member is a member of the senior management; (4) the staff member is responsible and accountable to the management body for the activities of the independent risk management function, compliance function or internal audit function; (5) the staff member has overall responsibility for risk management within a business unit as defined in Article 142(1)(3) of Regulation (EU) No 575/ which has had internal capital distributed to it in accordance with Article 73 of Directive 2013/36/EU that represents at least 2 % of the internal capital of the institution (a material business unit ); (6) the staff member heads a material business unit; (7) the staff member has managerial responsibility in one of the functions referred to in point (4) or in a material business unit and reports directly to a staff member identified pursuant to point (4) or (5); (8) the staff member has managerial responsibility in a material business unit and reports directly to the staff member who heads that unit; (9) the staff member heads a function responsible for legal affairs, finance including taxation and budgeting, human resources, remuneration policy, information technology, or economic analysis; (10) the staff member is responsible for, or is a member of, a committee responsible for the management of a risk category provided for in Articles 79 to 87 8 of Directive 2013/36/EU other than credit risk and market risk; (11) with regard to credit risk exposures of a nominal amount per transaction which represents 0.5 % of the institution s Common Equity Tier 1 capital and is at least EUR 5 million, the staff member: 7 'business unit' means any separate organisational or legal entities, business lines, geographical locations. 8 Credit and counterparty risk, Residual risk, Concentration risk, Securitisation risk, Market risk, Interest risk arising from non-trading book activities, Operational risk, Liquidity risk and Risk of excessive leverage. 9

10 (a) is responsible for initiating credit proposals, or structuring credit products, which can result in such credit risk exposures; or (b) has authority to take, approve or veto a decision on such credit risk exposures; or (c) is a member of a committee which has authority to take the decisions referred to in point (a) or (b); (12) in relation to an institution to which the derogation for small trading book business provided for in Article 94 of Regulation (EU) No 575/2013 does not apply, the staff member: (a) has authority to take, approve or veto a decision on transactions on the trading book which in aggregate meet one of the following thresholds: (i) where the standardised approach is used, an own funds requirement for market risks which represents 0.5 % or more of the institution s Common Equity Tier 1 capital; or (ii) where an internal model-based approach is approved for regulatory purposes, 5 % or more of the institution s internal value-at-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval); or (b) is a member of a committee which has authority to take decisions set out in point (a); (13) the staff member has managerial responsibility for a group of staff members who have individual authorities to commit the institution to transactions and either of the following conditions is met: (a) the sum of those authorities equals or exceeds a threshold set out in point 11(a), point 11(b) or point 12(a)(i); (b) where an internal model-based approach is approved for regulatory purposes those authorities amount to 5 % or more of the institution s internal value-at-risk limit for trading book exposures at a 99th percentile (one-tailed confidence interval). Where the institution does not calculate a value-at-risk at the level of that staff member the value-at-risk limits of staff under the management of this staff member shall be added up; (14) with regard to decisions to approve or veto the introduction of new products, the staff member: (a) has the authority to take such decisions; or (b) is a member of a committee which has authority to take such decisions; (15) the staff member has managerial responsibility for a staff member who meets one of the criteria set out in points (1) to (14). Quantitative criteria 1. Subject to paragraphs 2 to 5, staff shall be deemed to have a material impact on an institution s risk profile where any of the following quantitative criteria are met: (a) the staff member has been awarded total remuneration of EUR or more in the preceding financial year; (b) the staff member is within the 0.3 % of the number of staff, rounded up to the next integer, who have been awarded the highest total remuneration in the preceding financial year; (c) the staff member was in the preceding financial year awarded total remuneration that is equal to or greater than the lowest total remuneration awarded in that financial year to a member of senior management or meets any of the criteria in points (1), (3), (5), (6), (8), (11), (12), (13) or (14) of the Qualitative criteria above. 10

11 2. A criterion set out in paragraph 1 shall not be deemed to be met where the institution determines that the professional activities of the staff member do not have a material impact on the institution s risk profile because the staff member, or the category of staff to which the staff member belongs: (a) only carries out professional activities and has authorities in a business unit which is not a material business unit; or (b) has no material impact on the risk profile of a material business unit through the professional activities carried out. 3. The condition set out in point (b) of paragraph 2 shall be assessed on the basis of objective criteria which take into account all relevant risk and performance indicators used by the institution to identify, manage and monitor risks in accordance with Article 74 9 of Directive 2013/36/EU and on the basis of the duties and authorities of the staff member or category of staff and their impact on the institution s risk profile when compared with the impact of the professional activities of staff members identified by the criteria set out in Article 3 of this Regulation. 9 Directive 2013/36/EU, Article 74 Internal governance and recovery and resolution plans states in sub-section 1 that Institutions shall have robust governance arrangements, which include a clear organisational structure with well- defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management. 11