The European Parliament’s economic and monetary affairs committee has voted in favour of compensation limits for retail investment fund managers.

Bonuses for managers of UCITS, or European cross-border mutual funds, will be capped at 100% of annual salary in most cases, under the draft bill voted by the committee on Thursday. Half of bonuses would have to be paid in shares of the UCITS run by the manager.

UCITS control nearly €6.3 trillion in funds, according to the parliament, of which more than 30% is domiciled in Luxembourg, according to fund industry trade group Efama.

Such retail funds “must be subject to stricter rules, to protect investors in them properly”, the committee’s draft said. “Fund managers’ pay should be always aligned with the investors’ interests and the performance of the fund in question”.

While the committee “voted in favour of a compromise limiting bonuses, a majority of EPP members, amongst them Astrid Lulling, voted against” the measure, a spokesman for the Luxembourg MEP (photo), who told Delano a few hours after the vote. The CSV is a member of the EPP, or European People’s Party, bloc.

On Monday, a spokeswoman for the Association of the Luxembourg Fund Industry told Delano the group hoped for “some consistency” on compensation rules, as the “issue of remuneration” is already covered by several different EU regimes.

Depositary bank rules

The committee’s draft text also said that depositaries, neutral banks that safeguard assets on behalf of investors, “must act independently and solely in the interest of the UCITS asset holders--they must not trade in UCITS assets on their own account”.

The law would make “UCITS fund depositaries liable to UCITS and their unit holders for any loss of their assets, even if these assets were held in custody by a third party.”

The bill now faces a plenary vote at the European Parliament, currently expected to take place in April, and then must be approved by the European Commission and the Council of European finance ministers.