* EU lawmaker Giegold wants similar curb to bankers' pay cap
* Limit for bankers' payouts agreed last month
* Giegold says different rules provide ways to dodge cap
By John O'Donnell and Claire Davenport
BRUSSELS, March 18 Fund managers' bonuses must be capped in a similar way to bankers' payouts, said an influential EU lawmaker who will play a central role in negotiating changes to the bloc's rules.
Sven Giegold, a German member of the European Parliament, will seek to rally cross-party backing this week for tougher rules that would extend the clampdown on pay in finance, before a vote in the assembly on Thursday.
Last month, EU lawmakers and diplomats agreed to bar bankers in Europe from getting bonuses bigger than their base salaries from next year. If shareholders vote in favour, the cap can be increased to twice base pay, but no more.
The reform, which amounted to the toughest limit of its kind in the world and was opposed by Britain, should come into force next year.
Giegold's proposal, if backed by the parliament and then a majority of EU countries, would change bonus rules in a similar way for fund managers by amending EU law governing so-called undertakings of collective investment in transferable securities.
It would hit mutual funds, which have about trillion of euros under management, but would not affect hedge funds or private equity investors, which are governed by different rules.
"There is the fear that bankers could use different legal forms to circumvent the bonus cap," Giegold told Reuters on Monday. "By introducing similar restrictions on fund managers, we will avoid this. Different rules can otherwise only lead to arbitrage."
Fund managers' bonuses would be capped at the level of their base salaries, under Giegold's plan, though exact details have yet to be thrashed out.
His suggestion carries weight as he has been nominated by fellow lawmakers to negotiate with EU countries over changes to the law for fund managers.
LESS OF RISK
If parliament backs the change to the rules, EU lawmakers will hold talks with member states over introducing the bonuses curb across the bloc.
But Giegold could yet face opposition from Conservative camps in the European legislature and EU member states.
The bankers' cap sought to address public anger at what many politicians described as rampant greed in the financial sector, and at the industry's role in the 2008 financial crisis.
Lawmakers argued successfully for a cap on the grounds that it would make traders, for example, less likely to take risks that could affect the wider financial system.
It would be harder to make the same argument in the case of fund managers.
One senior member of the European Parliament, who asked not to be identified, cautioned that it would be difficult to justify strict curbs for fund managers as they pose less of a risk than banks.
Jon Terry, a partner at accountancy firm PwC, said such a change would further widen the gap between pay in the United States and Europe.
"If passed as proposed, these pay rules will make it much harder for the European asset management industry to retain its key talent," he said.
The ceiling for bank bonuses represented one of the most ambitious reforms in Europe after the financial crisis.
The cap has been softened somewhat by allowing banks to discount the future value of share options, bonds or other non-cash payments paid out over a number of years.
It will apply to EU-based employees of any bank, as well as to staff of EU banks wherever they are based. (Editing by Pravin Char)
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