Could FSA bonus rules face a legal challenge?
The Financial Services Authority (FSA) is this morning again the centre of attention with PricewaterhouseCoopers suggesting that recent proposal to shake up the UK banking arena with regards to remuneration and bonuses could lead to endless legal challenges. Under the proposals, the FSA would be able to void a contract between an employer and an employee if the employer breached the FSA's remuneration code.
The existing code will be tightened if these proposals are waved through and extended from larger banks, building societies and broker dealers in the UK to take in asset managers, hedge fund managers, investment firms and corporate finance. It is highly unlikely that in the big money of UK finance these companies will sit back and allow the FSA to dictate remuneration and bonuses and ultimately have the right to "void contracts".
While there's no doubt that many people would welcome a tightening of remuneration and bonus regulations within the financial industry, it has to be said that the actions proposed may well be dragged through the law courts. Even if these legal challenges were unsuccessful they could delay introduction of the proposed changes by many years. Is there no middle ground which the parties involved can find?
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