* Mutual fund managers must defer bonus under new rules
* Law could be in place as soon as late 2015
* Rules not as strict as bankers' bonus cap in Europe
By John O'Donnell
BRUSSELS, Feb 25 EU lawmakers and member states agreed curbs on fund managers' pay similar to new rules for bankers on Tuesday, including a three-year deferral of 40 percent of bonuses, legislation that could be in place next year.
The rules also stipulate that half of any cash bonus be spent on a stake in the fund manager's investment fund.
"We want to ensure that responsible remuneration policies are in place across the financial sector and that there are no loopholes for risky and dangerous trading practices," said lawmaker Arlene McCarthy, who also worked on banking pay curbs.
"The new rules will bring funds in line with EU bankers bonus rules, as there will be no guaranteed bonuses for fund managers and 40 percent of bonuses must be deferred," she said.
Member states have up to 18 months to introduce the law once it is formally signed off - likely in the next few weeks.
The rules are not as strict as those applied to bankers, which cap bonuses at the level of their annual salary. Some lawmakers had wanted tougher curbs but many EU countries were opposed, one person involved in the negotiations said.
The rule change will encompass mutual funds operating in the bloc, which have about 6 trillion euros ($8 trillion) under management, but not affect hedge funds or private equity investors, governed by different law.
European regulators now have to decide which staff at mutual funds should be covered by the rules, which may be the precursor to stricter and wider restrictions on pay in finance, possibly in future including remuneration at hedge funds.
EU lawmakers have also said they want to impose the same pay limits on managers of money market funds in a draft law making its way through the European Parliament.
The rules also envisage bolstering the role of a so-called "depositary" to oversee fund assets. Any fund falling foul of the new rules would face fines of up to 10 percent of turnover.
"Today's deal will deliver greater protection for investors, as well as taking steps to reduce reckless risk taking in the investment fund sector," Sven Giegold, a German lawmaker involved in the negotiations, said.
"The stricter rules on depositaries will ensure fraudulent schemes, like the (Bernard) Madoff case, cannot occur in Europe," he said, referring to the firm that collapsed in 2008, revealing a fraud that cost investors an estimated $17 billion.