The UK Stewardship Code (“the Code”), which arose from the Walker Review on Corporate Governance, is aimed at bringing about improved engagement between institutional investors and companies listed in the UK.
On 6 December 2010, COBS 2.2.3 came into effect requiring a firm, other than a venture capital firm, which manages investments for a professional client (that is not a natural person) to disclose on its website the nature of its commitment to the Financial Reporting Council’s (“FRC”) Stewardship Code. If the firm it does not commit to the UK Stewardship Code, it must disclose its alternative investment strategy.
Investment managers are required to apply the Code on a “comply or explain” basis. The UK Stewardship Code contains seven principles, whereby institutional investors should:
- Publicly disclose their policy on how they will discharge their stewardship responsibilities.
- Have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.
- Monitor their investee companies.
- Establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
- Be willing to act collectively with other investors where appropriate.
- Have a clear policy on voting and disclosure of voting activity.
- Report periodically on their stewardship and voting activities.
It is important to remember that commitment to the Code is voluntary; it is not an FCA requirement.
Oversight and operation of the UK Stewardship Code falls upon the FRC; the FCA will not require commitment to form part of its periodic reporting requirements.
However, disclosing whether a firm commits to the UK Stewardship Code, or if it doesn’t then what is its alternative business model, is an FCA requirement.
Client disclosures:
The following Complyport clients have already used our web-facility to publicly list their UK Stewardship Code disclosure:
