Stewardship Code Changes

It has been a Handbook requirement – COBS 2.2.3 – since 6 December 2010 that firms managing investments, other than venture capital firms, for professional clients (that are not natural persons), must disclose on their websites their commitment to the Stewardship Code (see Regulatory Roundup 23 for further details). The choice of whether or not to apply the Code is voluntary.

The Financial Reporting Council (FRC), the keeper of the Code, has issued a consultation paper on proposed changes (the consultation period has now closed). The seven Principles remain untouched; the aim of the consultation is to improve clarity. Interestingly, the introduction to the consultation document mentions that it has become clear that there is no common understanding of what is actually meant by the term “stewardship”: Principle 1 has been expanded to provide guidance on stewardship activities.

The revisions are also intended to identify more clearly the differing responsibilities of ‘asset owners’ and ‘asset managers’ whilst retaining the use of ‘institutional investor’ when referring to both owners and managers. The document acknowledges that specific stewardship activities carried out by owners and managers will vary depending on their circumstances. The Code will also apply, by extension, to service providers such as proxy advisors and investment consultants.

The marked up changes to the Code can be found in the associated consultation appendix.

The FRC does not envisage proposing further changes to the Code until 2014 at the earliest.

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