The U.K. Financial Conduct Authority has published a consultation on proposed changes to its Decision Making and Penalties Manual and Enforcement Guide to incorporate its new responsibility for regulation of proxy advisors. The proposals will be of interest to those falling within the Proxy Advisors (Shareholders' Rights) Regulations 2019 and anyone who uses the services of proxy advisors. Responses to the consultation should be submitted by July 26, 2019.

Proxy advisors provide research, advice and recommendations to shareholders in the exercise of their shareholder rights. In 2017, the revised Shareholder Rights Directive came into force, which includes provisions governing the activities of proxy advisors. The new obligations include requirements to disclose a code of conduct governing the provision of their services as well as information about their research, advice and voting recommendations.  Advisors are also required to identify and disclose conflicts of interest that may affect their advice and recommendations.

HM Treasury has implemented the provisions of the revised Directive via the Proxy Advisors (Shareholders' Rights) Regulations 2019, which came into force on June 10, 2019. Under the Regulations, the FCA was granted powers for investigating and disciplining proxy advisors. In its consultation paper, the FCA proposes to incorporate new procedures in its Manual and Enforcement Guide to: (i) remove an advisor from the public list of proxy advisors if they cease to provide services without notifying the FCA; and (ii) investigate and discipline proxy advisors that are subject to the U.K. Regulations but are not authorized by the FCA or Prudential Regulation Authority.

View the Consultation Paper.

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