On 24 October 2019, the FCA published feedback it received to its discussion paper on Building a Regulatory Framework for Stewardship (DP19/1), published jointly with the Financial Reporting Council (FRC).

The discussion paper considered how to improve stewardship in the UK capital markets, identifying minimum expectations for stewardship and the standards that the UK should aspire to.

The barriers to effective stewardship across the institutional investment community were revealed in the feedback statement. The barriers include:

  • regulatory uncertainties under MAR and competition law that may discourage engagement between issuers and investors;
  • investment mandates, voting guidelines and other arrangements between asset owners and asset managers may not be fully aligned with asset owners' and beneficiaries' investment and stewardship objectives ;
  • firms' governance arrangements may not put enough emphasis on the value of effective stewardship;
  • the information firms disclose on their stewardship may not be detailed enough for investors to distinguish between firms based on the quality of their stewardship; and
  • service providers (such as proxy advisors and investment consultants) may not adequately support investors' stewardship.

The FCA is proposing to take steps to remove these barriers, which include:

  • considering outcomes as the new regulatory regime for proxy advisors settles in; and
  • taking action to focus on the arrangements between asset owners, asset managers and service providers and how these support stewardship objectives.

The FCA's feedback statement can be found here.

Discussion paper (DP19/1) can be found here.

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