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Home > Regulation > UK Regulation

By Michael Trudeau | Published Jul 16, 2012

IMA: New disclosure plans could inflict unfair damage

The strengthened tone of the Financial Reporting Council’s UK Stewardship Code in relation to certain disclosure requirements could lead to companies suffering reputational damage despite having valid reasons for non-compliance, the Investment Management Association has claimed.

In proposed changes to the Stewardship Code, the FRC calls for an increased emphasis on reporting conflicts of interest and disclosing stewardship of other asset classes as well as UK equities.

In a December 2011 report, the FRC said reporting of how signatories managed conflicts of interest was “frequently weak” and it noted that “relatively few signatories stated categorically they always sought to place the interest of their clients first”.

Liz Murrall, IMA’s Director of Corporate Governance and Reporting, said the association broadly agrees with the proposed changes, saying that “the additional clarity will help encourage greater transparency in any policy statements.”

However, Ms Murrall also pointed out that the tone of the document has been strengthened under the proposed changes and that this could lead to unfair unintended consequences.

She said: “The Code is to be applied on a “comply or explain” basis but a number of the proposed changes strengthen the text and push it more to “comply or else”.

“As a result, firms that do not adhere to the code will be viewed negatively even if they provide explanations and valid reasons for their non-adherence.

“This is particularly relevant to the proposals on voting disclosure and the independent verification of the stewardship process.”

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