FCA Consults On Effective Stewardship


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(link is external) 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.’

Source: FCA

Commenting on the publication of the proposed new Stewardship Code, Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association said:

“The stewardship landscape has changed significantly since the Code was last reviewed, so it is right that it is being refreshed.

“Asset managers are a key player in the stewardship process, providing ongoing monitoring and engagement to ensure that they are investing in ways that will deliver long-term returns for savers and investors. Asset managers have been clear that any new Code should require signatories to report against actual stewardship activity, rather than just the policy that sits behind them, and should also reflect the growing range of issues that asset managers engage on, such as diversity and ESG. The new proposed Code recognises these key issues and provides a platform for them to be firmly embedded in the final version of the Stewardship Code.

“We will work with the FRC to ensure that the final Code fully reflects the important role of stewardship and ensures that the UK reclaims the mantle as a global leader in stewardship.”

Source: Investment Association

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