On 14 May 2019, there was published on legislation.gov.uk The Proxy Advisors (Shareholders’ Rights) Regulations 2019, together with an explanatory memorandum.
These Regulations transpose Article 3j of the revised EU Shareholder Rights Directive (SRD II) into UK law, in line with the UK’s obligations as a member of the EU. Article 3j of SRD II places requirements on proxy advisors, which primarily offer voting services and / or advice to shareholders in publicly listed companies, to make certain disclosures about the way in which they conduct their business.
Amongst other things, proxy advisors will be required to:
- disclose reference to a code of conduct which they apply, and report on the application of the code. If proxy advisors apply a code of conduct but depart from its recommendations, they must declare the parts of the code from which they depart, why they depart from it and indicate any alternative measures adopted. Where proxy advisors do not apply a code of conduct at all, they must explain why this is the case;
- disclose information on their research capabilities and how they produce their advice and voting recommendations (e.g., models, methodologies, information sources and resources); and
- identify and disclose any actual or potential conflicts of interests or business relationships that may influence the preparation of their research.
The requirements apply to a proxy advisor which, has its registered office (or where it does not have a registered office, its head office) in the UK; or has its registered office or head office in any country or territory other than the UK, Gibraltar or an the EEA and provides proxy advisor services through a body in the UK; and provides services to investors holding shares in firms whose registered office is in the UK, Gibraltar or the EEA, and whose shares are traded on a regulated market in the UK, Gibraltar or the EEA.
The Regulations enter into force on 10 June 2019.