The FCA is proposing new measures and gathering views on how to encourage effective stewardship in the interests of investors. Most UK consumers hold investments, for example through their pensions, which are looked after by asset managers. Asset managers have a duty to oversee these investments in their clients’ interests.
The FCA, in conjunction with the Financial Reporting Council (FRC), is now asking what more could be done to encourage asset managers to monitor closely the companies they invest in, actively engage with them, and hold them to account on material issues – delivering long-term, effective stewardship.
The two papers published today are:
- A Consultation Paper on regulatory measures to implement the provisions of the amended Shareholder Rights Directive (SRD II) for FCA-regulated life insurers and asset managers, as well as for issuers of shares in respect of related party transactions. The Directive comes into effect in June 2019 and, assuming a transition period for EU Withdrawal is agreed, will need to be transposed in the UK. SRD II aims to promote effective stewardship and long-term investment decision-making.
- A joint Discussion Paper (DP) by the FCA and the FRC on the importance of effective stewardship. This DP aims to advance the debate about what effective stewardship should look like, what the minimum expectations should be for financial services firms who invest for clients and beneficiaries, the standards the UK should aspire to and how these might best be achieved.
In developing these papers, the FCA has worked closely with the Department for Business, Energy and Industrial Strategy, Her Majesty’s Treasury, the Department for Work and Pensions and the FRC. The FRC has sought to advance high standards in stewardship through its Stewardship Code. In a separate Consultation Paper published today alongside these papers, the FRC sets out proposed revisions to the Stewardship Code. With these revisions, the FRC aims to consolidate and to maintain the UK’s strong reputation on stewardship internationally.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: 'Good stewardship is about effective investment for the longer term. As a result, we want to see those managing investments to take a close interest in how the businesses they invest in are operating, so they can hold them to account when things aren’t right.'