Standards for performance evaluations and emoluments for a securities firm's managers and salespersons, and the structure and system of its directors' emoluments shall be established based on the following principles:
For purpose of the Principles, salespersons are individuals whose emoluments or performance evaluations are based on their sales of various financial products and/or services.
- A securities firm shall establish the standards for, or the structure or system of, performance evaluations and emoluments based on the performance after taking into consideration future risks, and with reference to the company's overall long-term profits and shareholders' interest.
- The emolument and incentive system is not designed to encourage directors, managers and salespersons to attempt to perform an act that falls outside of its risk appetite. The securities firm shall regularly review the emolument and incentive system and performance to ensure they are within the company's risk appetite.
- How long a securities firm pays emoluments shall be subject to its profits after future risks have been taken into consideration to prevent the securities firm from suffering losses after paying emoluments and other adverse circumstances. A significant part of emoluments paid as incentives shall be in a deferred manner or in the form of equities.
- When evaluating contribution of a director, manager and salesperson to the company's profits on a personal level, a securities firm shall perform an overall analysis of the securities industry to figure out if their profits were generated because they have used the company's overall advantages such as lower cost of funds so that it will be able to have a meaningful evaluation of their individual contribution.
- A securities firm's agreement on severance pay with its director, manager and salesperson shall be made based on the performance that has been achieved to prevent the occurrence of a circumstance where an individual receives a large amount of severance pay after a short-term employment, and other inappropriate circumstances.
- A securities firm shall fully disclose to its shareholders the principles, methods and goals based on which it has established the standards for, or structure and system of, performance evaluations and emoluments as described above.