UK: England and Wales: Law Commission report - the fiduciary duties of investment intermediaries

The Law Commission for England and Wales yesterday published its report Fiduciary Duties of Investment Intermediaries: see here (pdf). An executive summary is available here (pdf). The report is the product of work undertaken following a recommendation in the Kay Review of UK equity markets and long-term decision making.

The Commission concludes that the law of fiduciary duties should not be reformed by statute. It recommends that it is for the Government to decide if investors should have greater rights to sue intermediaries (and a possible option, based on section 138D of the Financial Services and Markets Act 2000, is highlighted).

The Law Commission also advises that there is no impediment to trustees taking account of environmental, social or governance factors where these are, or may be, financially material. It advises that when trustees invest in equities over the long-term they should consider, in discussion with their advisers and investment managers, how to assess risks (including risks to a company's long-term sustainability).

The Commission accepts that trustees need more guidance but it does not advocate codification of the law; instead, it hopes that its report - and accompanying guidance for trustees in respects of their duties when setting an investment strategy: see here (pdf) - will prove useful.