The Proxy Advisors (Shareholders’ Rights) Regulations 2019

Document Number:2019 No. 926
Coming into force:Coming into force on the 10/06/2019
 
FREE EXCERPT

Statutory Instruments

Financial Services And Markets

Made

13 th May 2019

Laid before Parliament

14 th May 2019

Coming into force

10 th June 2019

The Treasury are a government department designated(1) for the purposes of section 2(2) of the European Communities Act 1972(2) in relation to financial services.

The Treasury make the following Regulations in exercise of the powers conferred by section 2(2) of the European Communities Act 1972.

PART 1 General

Citation and commencement

  1. These Regulations may be cited as the Proxy Advisors (Shareholders’ Rights) Regulations 2019 , and come into force on 10 th June 2019.

    Interpretation

  2. —(1) In these Regulations—

    “the Act” means the Financial Services and Markets Act 2000(3);

    “the FCA” means the Financial Conduct Authority;

    “proxy advisor” means a person who—

    is a proxy advisor within the meaning given by point (g) of Article 2 of the Shareholder Rights Directive(4);

    provides proxy advisor services to a shareholder with respect to the shares of any company where—

    the company’s registered office is situated in the United Kingdom or another EEA State, or in Gibraltar; and

    the shares are admitted to trading on a regulated market situated or operating within the United Kingdom or another EEA State, or in Gibraltar; and

    either—

    has its registered office (or if it does not have a registered office, its head office) in the United Kingdom; or

    has its registered office or head office in any country or territory other than the United Kingdom or any other EEA State or Gibraltar, and provides proxy advisor services through an establishment located in the United Kingdom; and

    “proxy advisor services” means services provided by a person acting in the capacity of a proxy advisor within the meaning given by point (g) of Article 2 of the Shareholder Rights Directive.

    (2) In paragraph (1)—

    (a)“Shareholder Rights Directive” means Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies(5); and

    (b) in the definition of “proxy advisor”, in paragraph (b) the expressions “shareholder” and “regulated market” have the meaning given in Article 2 of that directive.

    PART 2 Transparency requirements in relation to proxy advisors

    Code of conduct of proxy advisors

  3. —(1) Where a proxy advisor (“P”) provides proxy advisor services in accordance with or by reference to a code of conduct, P must disclose to the public—

    (a) a reference to the code of conduct, by means of which any person may readily view it;

    (b) a report on the manner in which P has applied the code of conduct; and

    (c) where P’s practice is to depart from any of the recommendations contained in the code of conduct, a statement which specifies the recommendations concerned, explains the reason for departing from them, and indicates any measures adopted instead of them.

    (2) Where P, in the provision of proxy advisor services, does not provide those services in accordance with or by reference to a code of conduct, P must provide a clear and reasoned explanation of P’s reasons for not doing so.

    (3) All information which P is required to disclose under paragraphs (1) and (2) must be—

    (a) made available free of charge;

    (b) published on P’s website; and

    (c) published for the first time no later than 21 st June 2019.

    (4) All information published by P in accordance with paragraph (3) must be updated—

    (a) for the first time, no later than the end of P’s first financial year starting after 10 th June 2019; and

    (b) subsequently, at intervals of no more than twelve months beginning with the date on which it was last updated.

    Information giving assurance about the accuracy and reliability of advice

  4. —(1) With the object of giving the clients of a proxy advisor (“P”) assurance about the accuracy and reliability of P’s proxy advisor services, P must disclose to the public the following information relating to P’s preparation of research, advice and voting recommendations—

    (a) the essential features of the methodologies and models applied for the provision of those services;

    (b) the main sources of information used for the provision of those services;

    (c) the procedures put in place to ensure that P’s research, advice and voting recommendations are of an adequate quality and are prepared by staff who are suitably qualified to prepare them;

    (d) whether P takes account of national market, legal, regulatory and company-specific conditions, and if P does so, how P takes account of those matters;

    (e) the essential features of the voting policies applied for each market;

    (f) whether P has a dialogue with the company which is the object of P’s research, advice or voting recommendations, or with persons who have a stake in that company, and if P does so, the extent and nature of the dialogue; and

    (g) P’s policy regarding the prevention and management of potential conflicts of interest.

    (2) This regulation does not have effect in relation to any information of a kind specified in paragraph (1) if, or so far as, that information is disclosed to the public in compliance with regulation 3.

    (3) All information which P is required to disclose under paragraph (1) must be—

    (a) disclosed by publication on P’s website;

    (b) published for the first time no later than the end of P’s first financial year starting after 10 th June 2019; and

    (c) made available free of charge for a period of at least three years beginning with the date on which it is published for the first time.

    (4) All information published by P in accordance with paragraph (3) must be updated—

    (a) for the first time no later than the end of the period of twelve months beginning with the date on which it was first published; and

    (b) subsequently, at intervals of no more than twelve months beginning with the date on which it was last updated.

    Conflicts of interest

  5. —(1) A proxy advisor (“P”) must take all appropriate steps to ensure—

    (a) that P identifies any actual or potential conflict of interest or any business relationship that may influence P in the preparation of research, advice or voting recommendations; and

    (b) that such a conflict of interest or business relationship is identified without delay after the time at which it arises.

    (2) Where P has identified an actual or potential conflict of interest or a business relationship of the kind specified in paragraph (1) , P must, without delay—

    (a) disclose that fact to P’s clients together with particulars of the conflict of interest or business relationship concerned; and

    (b) give P’s clients a statement of the action P has undertaken to eliminate, mitigate or manage the conflict of interest or business relationship concerned.

    Obligation to collect and update information

  6. A proxy advisor must collect and keep up to date all information required to enable it to comply with its obligations relating to the disclosure of information under this Part.

    PART 3 Functions of the FCA in relation to proxy advisors

    Interpretation of Part

  7. —(1) In this Part, except in regulations 9 and 10 , “relevant requirement” means—

    (a) a requirement imposed by Part 2 of these Regulations;

    (b) a requirement imposed by regulation 9; or

    (c) a requirement to give notice under or in accordance with regulation 31 or 32.

    (2) In regulations 9 and 10 “relevant requirement” means—

    (a) a requirement imposed by Part 2 of these Regulations; or

    (b) a requirement to give notice under or in accordance with regulation 31 or 32.

    (3) In this Part, in relation to a requirement to give notice under or in accordance with regulation 32 , a reference to a proxy advisor is a reference to a person who is required to comply with that requirement.

    Functions of the FCA

  8. The FCA, in discharging the functions conferred on it by this Part or by any provision of the Act applied by Part 4 of these Regulations (as so applied) , must have regard to the need to use its resources in the most efficient and economic way.

    Notice of inability or failure to comply with a relevant requirement

  9. —(1) If, at any time, a proxy advisor considers that it is unable to comply with a relevant requirement, it must as soon as reasonably practicable notify the FCA of that fact and of the reasons why it is unable to comply.

    (2) A proxy advisor must immediately notify the FCA of any contravention of a relevant requirement of which the proxy advisor becomes aware.

    Complaints

  10. The FCA must maintain arrangements designed to enable any person to submit to it a complaint that a proxy advisor has contravened a relevant requirement.

    Public censure

  11. Where the FCA considers that a proxy advisor has contravened a relevant requirement, the FCA may publish a statement to that effect.

    Financial penalties

  12. —(1) Where the FCA considers that a proxy advisor has contravened a relevant requirement, the FCA may impose a penalty of such amount as it considers appropriate on the proxy advisor.

    (2) A penalty imposed under this regulation is payable to the FCA and may be recovered as a debt owed to the FCA.

    Warning notice

  13. —(1) Where the FCA proposes to—

    (a) publish a statement in respect of a proxy advisor under regulation 11 , or

    (b) impose a penalty on a proxy advisor under regulation 12 ,

    it must give the proxy advisor a warning notice.

    (2) A warning notice about a proposal to publish a statement must set out the terms of the statement.

    (3) A warning notice about a proposal to impose a penalty must state the amount of the penalty.

    Decision notice

  14. —(1) Where, having considered any representations made in response to the warning notice, the FCA decides to—

    (a) publish a statement under regulation 11 (whether or not in the terms proposed) , or

    (b) impose a penalty under regulation 12 (whether or not of the amount proposed) ,

    it must without delay give the proxy advisor concerned a decision notice.

    (2) In the case of a statement, the decision notice must set out the terms of the statement.

    (3) In the case of a penalty, the...

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