On 30 January 2019, the FCA published Consultation Paper 19/7 (CP19/7) on proposals to improve shareholder engagement. CP19/7 sets out how parts of the revised Shareholder Rights Directive (SRD II) will be implemented in the UK.

SRD II aims to promote effective stewardship and long-term investment decision making. CP19/7 relates to the implementation of those parts of SRD II which apply directly to financial services firms that are regulated by the FCA, and to issuers in respect of related party transactions.

To implement SRD II, the FCA proposes to introduce rules that require:

  • asset managers and certain life insurers to make disclosures relating to their shareholder engagement policies;
  • life insurers to:
    • make disclosures about their arrangements with asset managers; and
    • publicly disclose how the main elements of their equity investment strategy are consistent with the profile and duration of their liabilities, long-term liabilities, and how these elements of their strategy contribute to the medium to long term performance of their assets;
  • asset managers to make disclosures relating to their arrangements with asset owners and how their investment strategies are consistent with the medium and long-term performance of the assets of the asset owner or fund; and
  • UK companies with shares admitted on a regulated market to disclose and seek board approval for related party transactions.The deadline for responses to CP19/7 is 27 March 2019.

SRD II also provides, in certain instances, for alternative implementation options. The FCA has consequently made certain policy choices and interpretations surrounding the text of SRD II which it deems suitable for the UK. E.g. ‘shares traded on a regulated market’ under Chapter 1b SRD II is interpreted as meaning any share that has a primary or secondary listing on an EEA market.

The deadline for responses to CP19/7 is 27 March 2019.