SRD II – Late Notice, Urgent Action

Although remarkably little has been said about it and the FCA has only just published its Policy Statement (PS 19/13), the revised Shareholder Rights Directive (SRD II) comes into force on Monday (10th June). There is immediate action associated with this new directive.

The impact of the new rules is that investment firms must publish an Engagement Policy and annually disclose how the Policy has been implemented, including how the firm has voted in significant corporate ballots. Alternatively, firms are permitted to ‘explain’, that is to say publicly disclose a reasoned explanation of why they have chosen not to publish an Engagement Policy or the annual disclosed about implementation.

The Policy, which must set out how the firm engages with the companies that it invests in on behalf of clients, should, strictly, be published by Monday. FCA recognises that that is not going to happen and has said that for an ‘initial period’ firms can comply by explaining what they are dong to develop a Policy. That means that all affected firms should have a statement on their website relating to their Engagement Policy by Monday.

Although not irrevocable, firms have an immediate choice of whether to comply or explain. Controversial as it may be to opt out (explain), it is worthy of consideration. There are questions of principle about client confidentiality and there are risks that the disclosure is abused by pressure groups. However, that explanation must also be published by Monday.

Firms wanting further information on this should call us on 020.3911.5528.


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