The Financial Reporting Council (FRC) has signalled its intention to get tougher on compliance with its Stewardship Code by publishing public assessments on how companies are meeting the requirements from July 2016 following a failure by some companies to be transparent and consistent in line with the governance principles of the code
The Stewardship Code, introduced by the FRC in 2010, sets out a number of good practice areas which investors should aspire to and operates on a 'comply or explain' basis. The regulator says that over the past five years the quality and quantity of stewardship has improved but not consistently and transparently.
It now plans to assess signatories’ reporting against the Code and make public its assessment. Signatories will be assigned to one of two categories.
Those assessed as meeting reporting expectations in relation to stewardship activities will placed in Tier 1. Additionally, asset managers will be asked to provide evidence of the implementation of their approach to stewardship. The FRC says it will look particularly at conflicts of interest disclosures, evidence of engagement and approach to resourcing and integration of stewardship.
Asset managers who are assessed as not meeting reporting expectations will be assigned to Tier 2.
Before making a public assessment, the FRC says it will contact firms with feedback to allow time for improvements.
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