The Financial Conduct Authority (FCA) has updated its proxy advisor enforcement rules following industry feedback.
The update follows the regulator’s proxy advisor Shareholders’ Rights Regulations (SRD II), which came into force in June, that gave the FCA powers to discipline and investigate proxy advisors.
The regulations require proxy advisors to disclose how they produce their advice and voting recommendations, report on which code of conduct they follow, and identify any conflicts of interest with the aim of providing greater transparency.
As a result of the new obligations, the FCA launched a consultation in the summer, proposing how to amend its Decision Procedure and Penalties manual (DEPP) and the Enforcement Guide (EG) to reflect the revised SRD II rules.
The consultation received three responses, one of which was from Minerva.
Updates to the DEPP include decisions on when to publish a statement about a proxy advisor who has breached a relevant requirement and when to impose financial penalties.
In contested cases, the FCA said it will decide to impose a public censure under the Regulatory Decisions Committee (RDC), while in settled cases, outcomes will be determined using its executive procedures.
The RDC, which operates separately from the rest of the FCA, is the final stage of decision-making within the regulator.
The FCA also revealed it will use the RDC process when deciding if someone should pay restitution, while it will use its executive procedures in cases where an individual might need to be removed from the public list of proxy advisors.
In addition, the regulator’s Enforcement Guide (EG) now includes a section setting out the Proxy Advisors Shareholders’ Rights Regulations framework and what the FCA’s new powers involve.
“The FCA will seek to exercise its enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with its publicly stated policies,” the FCA enforcement guide states. “It will also seek to ensure fair treatment when exercising its enforcement powers. Finally, it will aim to change the behaviour of the person who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance,
Last Updated: 28 November 2019