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Regulators will remove asset managers and pension funds from the UK stewardship code, launched in 2010 to improve corporate oversight, if they fail to meet certain standards on the reporting of a wide range of governance issues.
Groups such as Franklin Templeton Investments, Toscafund Asset Management, Neuberger Berman Europe and UK wealth manager Brewin Dolphin face being axed as signatories of the code if they fail to improve reporting standards.
The UK has led the world on governance and stewardship, with many countries around the globe following Britain’s example in creating a code, which has a range of principles on issues such as engagement, voting and conflicts of interest.
“This is a significant move in an effort to encourage asset managers and owners to raise standards and report in a better way,” said David Styles, director of corporate governance at the Financial Reporting Council.
“It will give clients a better idea of what asset management groups and owners are doing on stewardship, how they are disclosing the way they vote, whether they use proxy advisers and how they are dealing with any potential conflicts of interest.”
Paul Lee, head of corporate governance at Aberdeen Asset Management, added: “The UK was the first country to establish a stewardship code. Clients will now be better able to choose fund managers on the basis of stewardship as well as performance, with a code that has teeth.”
The FRC has created three tiers for its nearly 300 signatories to the code, which includes asset managers, pension funds and consulting groups. This is based on the quality of reporting on the seven principles of the code.
Groups that have not achieved at least Tier 2 status after six months will be removed from the list of signatories.
Full article on Financial Times (subscription required)