Asset managers must begin publishing engagement policies for investee companies in a bid to improve stewardship, transparency, and stakeholder relationships.
The final plans revealed by the Financial Conduct Authority (FCA) today (31 May), are also aimed at addressing "short termism and insufficient engagement by shareholders" with the asset management industry.
From 10 June, fund managers will have to publish their engagement policy and then follow this up on an annual basis with information on this has then been implemented - or explain why this has not been done.
Additionally, they will have to provide information to asset owners, including pension funds, on how their investment strategies contribute to the medium- to long-term performance of their assets.
Recognising the paper was published with just 10 days' notice, the FCA has said it will, "for an initial period", consider firms as complying with the new rules if they explain what they are doing to develop their engagement policy. For example, this could include simply explaining it is developing one or considering whether or not to have one.
The annual reports on implementation will also begin in the first full period after the rules come into effect.
The rules form part of the UK's implementation of the European Commission's second Shareholder Rights Directive (SRD II), but will operate on a comply-or-explain basis only to firms investing in shares traded on a regulated market.
In its policy paper, the FCA said the success of the measures could only truly be assessed by asset owners.
It said: "One aim of SRD II is to enable asset owners to understand the way in which their asset managers engage with the companies in which they invest. Different asset managers will choose to explain their offerings in different ways. Asset owners can then judge whether or not that offering meets their needs."
The FCA said the policy will align with its wider objectives on promoting greater transparency and thereby improving markets, increasing efficiency and effectiveness of capital allocation, and aligning incentives across the institutional investment community with the long-term interests of consumers.
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