On July 28, 2016, the European Commission (EC) issued its report (Report) to the European Parliament and the Council of the E.U. on the remuneration rules that were adopted in June 2013 for credit institutions and investment firms (Rules). The Report finds that the Rules – which impose limits on variable remuneration, require deferral of a portion of variable pay and mandate payment of a portion of variable compensation in non-cash instruments – have generally been well-received. However, the Report noted that it is too early to judge whether the limits on variable remuneration imposed by the Rules are having the intended effect of aligning individual and business interests and reducing risk. This article highlights the key provisions of the Report, with a focus on the provisions applicable to hedge and other private fund managers. For more on principal or employee compensation, see “Use by Hedge Fund Managers of Profits Interests and Other Equity Stakes for Incentive Compensation” (Apr. 18, 2014); and “How Can Hedge Fund Managers Use Profits Interests, Capital Interests, Options and Phantom Income to Incentivize Top Portfolio Management and Other Talent?” (Aug. 22, 2013).