What are the consequences of breaching the Code?
Certain contractual provisions which contravene the provisions of the Code would be rendered void. The firm would be under an obligation to recover any sums paid, or property transferred to an individual under such contractual provisions, and would additionally be restricted from paying the relevant employee variable remuneration for the same performance year, unless it has a legal opinion to state that an award complies with the Code.
As the Code consists of rules in the FCA’s Senior Management Arrangements, Systems and Controls sourcebook (SYSC), any breach will be a breach of SYSC rules. Serious breaches might also breach the FCA’s Principles for Businesses and significant breaches are likely to lead to the FCA taking disciplinary action against the firm.
In order to establish whether a firm is complying the Code, the FCA can ask a firm’s remuneration committee to provide evidence of how well its “remuneration policies” comply with the Code’s principles.
SYSC 19A 3.32 states that a firm must ensure variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the Code.
The Code is enforced by both the FCA and PRA.