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Vote Reporting Group to Hold UK Asset Managers to Account

FCA-led initiative aims for “comprehensive set of disclosures” covering voting activity by asset managers.  

A new era of accountability of asset managers to pension schemes and other asset owners is the hoped-for result of an initiative from the UK’s Financial Conduct Authority (FCA). 

The Vote Reporting Group has been set up to examine the obstacles to the flow of information from managers to asset owners as to how they exercised voting rights. 

“Currently it can be hard for asset owners to see if intentions have been followed,” said Claudia Chapman, Head of Stewardship at the FRC, who is working on the project while on secondment at the FCA. “This will empower asset owners, as well as being generally good practice.” 

Chapman added: “This is quite a big group, including representatives from pension funds, insurers, asset managers, proxy advisors, investment consultants, registrars and issuers.” 

The group will spend six months drawing up proposals for a more comprehensive vote disclosure regime, which will then go out for consultation for a further six months.  

“Our vision is for asset managers to publish a comprehensive set of disclosures covering their voting activity at the fund or mandate level,” said Sacha Sadan, the FCA’s Director of ESG, in a letter confirming the establishment of the group last month to Pensions Minister Alex Burghart.  

Regulatory or voluntary? 

Mark Manning, Technical Specialist in Sustainable Finance and Stewardship at the FCA said the outcome of the group’s work would be to “deliver decision-useful information for asset owners, while also being feasible and effective for reporting asset managers”. 

Chairing the group is Deborah Gilshan, an independent adviser with more than 21 years’ experience of global investment stewardship and shareholder engagement. Manning said he was delighted she had agreed to take this position, adding that he “can’t think of anyone better placed” to steer the group’s work to a successful conclusion. 

The new group, whose first meeting was held on November 3, has terms of reference that highlight three key tasks needing attention. The first is to “develop a recommendation on minimum vote reporting requirements for asset managers”.  

It is to draw up a vote reporting framework, which will include information on whether there was a vote against the board; on details of votes against and for resolutions put down by shareholders; on whether a vote was withheld; whether or not the vote was in line with the manager’s published policy, and the rationale for the vote. 

The second task is to “develop a recommendation on ownership of the vote disclosure framework”; the group “should consider the most appropriate body to assume long-term ‘policy’ ownership”, and as part of its recommendation, the group “should recommend whether its vote reporting framework should inform future regulatory rules for consultation by the FCA, or – at least initially – be adopted as a voluntary set of industry guidelines”. 

Insufficiently granular information 

In addition, the group “should also set out how the voting disclosure template should be reviewed into the future, to ensure that the disclosures continue to meet the needs of asset owners and that they reflect the latest developments in vote reporting and the technology available to market participants”. 

Finally, the group “should consider the most appropriate body to assume physical ownership of vote reporting data; i.e. considering who will manage the reported data on a day-to-day basis, where those votes will be stored, and how data will be accessed.” This may be an industry body or an appropriate regulator”. 

The establishment of the group follows the publication of a report on pension scheme voting by the Taskforce on Pension Scheme Voting Implementation last year. The FCA said the review was motivated by “increased demand and focus on pension scheme voting (particularly in relation to ESG issues); increased focus on the outcomes of stewardship and voting, and reporting issues connected to disclosure, data, and forms of reporting”. 

The FCA added that its “overarching aim is to build an industry consensus on a comprehensive vote reporting framework for asset managers in the UK”, adding: “The current vote disclosure regime does not provide sufficiently comprehensive and granular information on voting, especially at the fund or mandate level, to enable investors and broader market participants to hold asset managers to account on their voting practices.” 

Some attendees at the first meeting wanted to expand the terms of reference to take in subjects including conflicts of interest between asset managers and asset owners, vote confirmation and communication of vote outcomes to investors. The FCA said: “While the group recognised the validity of these, it was recognised that the scope of the work of the group will be limited to its original remit given the time constraint of the project.” 

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