On 28 September 2016, the Prudential Regulation Authority (PRA) published a policy statement which finalised new rules for the treatment of buy-out awards.
The rules come into effect from 1 January 2017 via amendments to the PRA Rulebook. They should be applied when an employee with Material Risk Taker (MRT) status at a level one or two firm moves to a new company that is also subject to the PRA Rulebook.
The rules state that:
- When an employee serves notice on their employment, the firm must provide the leaving individual with a 'remuneration statement' within 14 days
- The remuneration statement must contain prescribed information relating to awards made when the individual had MRT status, including details of the terms that apply (deferral, post-vesting retention, malus and clawback)
- The new employer must ensure the buy-out award is subject to malus and clawback on similar terms
- The old employer must then notify the new employer when malus and clawback should be applied to their previous employee
What can you do to make sure you're prepared?
 | Record keeping Consider data retention periods for information on MRTs in order to produce remuneration statements when needed |
 | Employment contracts Check with HR/Legal that employment contracts allow buy-out rules to be applied – implement changes or side letters if required |
| Leaver processes Update your leaver processes to ensure the 14 day timeline for remuneration statements are taken into account |
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Review your processes for the application of malus/clawback to ensure you contact new employers when an old employee is caught by a performance adjustment
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