Season's greetings and best wishes for the new year

Season's greetings and best wishes for 2014 to all blog visitors and those receiving the daily e-mail updates. I hope that you have found the contents useful and interesting over the past year. The first blog post for 2014 will appear on January 2.

Ireland: revised governance code for credit institutions and insurance undertakings

The Central Bank yesterday published a revised edition of its corporate governance code for credit institutions and insurance undertakings: see here (pdf). A summary of the main changes made in the new edition is available here.

Guernsey: The Limited Liability Partnerships (Guernsey) Law 2013

The Limited Liability Partnerships (Guernsey) Law 2013 was approved earlier this month by Parliament: see here (pdf). A copy of the legislation, which now awaits Royal sanction (through an Order in Council), is available here (pdf).

UK: Co-operative and Community Benefit Societies Bill introduced in House of Lords

The Co-operative and Community Benefit Societies Bill was introduced in the House of Lords last week and received its first reading: see here. The purpose of the Bill is to consolidate the legislation relating to co-operative and community benefit societies (formerly known as industrial and provident societies). A copy of the Bill, as introduced, is available here and here (pdf). The accompanying table of origins is available here (pdf). The Bill's progress can be followed here.

UK: England and Wales: Court of Appeal considers definition of market abuse

Earlier this year the Upper Tribunal (Tax and Chancery Chamber) upheld a decision of the Financial Services Authority to fine a Canadian company £8 million for market abuse under section 118 of the Financial Services and Markets Act 2000: see here (pdf). This decision was upheld yesterday by a majority in the Court of Appeal (Longmore and Floyd LJJ; Lewison dissenting in respect of one ground of appeal): see 7722656 Canada Inc v The Financial Conduct Authority [2013] EWCA Civ 1662. The court's decision is an important one, not least because of what is said about the definition of market abuse under section 118. For example, Lord Justice Longmore stated that the words "in relation to" - used in the definition of market abuse that requires behaviour to occur in relation to qualifying investments - were of "great width".

UK: Financial Services (Banking Reform) Act 2013 - copy of Act published and update on secondary legislation

A copy of the Financial Services (Banking Reform) Act 2013 was published today on the UK legislation website: see here or here (pdf). The Act became law yesterday and will be supported by secondary legislation. In this regard, the Government yesterday published a summary of the responses received in respect of four proposed statutory instruments: see here (pdf). The Government also explained how it intends to proceed in respect of these statutory instruments, which include the Ring-fenced Bodies and Core Activities Order; Excluded Activities and Prohibitions Order; Banking Reform (Loss Absorbency Requirements) Order; and Fees and Prescribed International Organisations Regulations).

UK: FRC report on impact and implementation of the corporate governance and stewardship codes

The Financial Reporting Council has published its third annual report on the impact and implementation of the UK Corporate Governance and Stewardship Codes: see here (pdf). The report notes that there is room for improvement in respect of the quality of reporting on corporate governance because there are too many examples of generic and boiler-plate reporting. An overview of the report's findings is available here.

Europe: Advocate General Sharpston considers Prospectus Regulation and Directive

Article 29 of Regulation 809/2004 sets out certain requirements in respect of the electronic publication of a prospectus, including that it should be easily accessible. This requirement was amongst several matters considered by Advocate General Sharpston in an opinion delivered last month: Michael Timmel v Aviso Zeta AG (Case C‑359/12). The Advocate General has advised that where a prospectus is published electronically on a website, making access subject to registration and acceptance of a disclaimer and provision of an e-mail address would not be compatible with the concept of easy accessibility under Article 29.

The Advocate General also considered Article 22(2) of the Regulation, which sets out the minimum information to be included in a base prospectus. She has advised that Article 22(2) should be interpreted to mean that information that, in principle, is required to be provided and which was not known at the time of approval of the base prospectus, but was known at the time of publication of a supplement to that prospectus, does not have to be included in the supplement where that information does not give rise to a significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities for the purposes of Article 16(1) of the Prospectus Directive 2003/71/EC.

IFSB adopts two new standards - risk management and capital adequacy

The Islamic Financial Services Board has adopted two new standards: [1] IFSB-14: Standard on Risk Management for Takāful (Islamic Insurance) Undertakings; and [2] IFSB-15: Standard on Revised Capital Adequacy for Institutions offering Islamic Financial Services (other than Takāful Institutions and Islamic Collective Investment Schemes). For further information see here.

UK: The Financial Services and Markets Act 2000 (Designated Consumer Bodies) Order 2013

The Financial Services and Markets Act 2000 (Designated Consumer Bodies) Order 2013 was laid before Parliament yesterday and comes into force on 14 January 2014: see here (pdf). The Order designates the National Association of Citizens Advice Bureaux, the Consumers’ Association, the General Consumer Council for Northern Ireland and the National Federation of Self Employed and Small Businesses, as bodies that can make complaints under section 234C(1) of the Financial Services and Markets Act 2000 (inserted by section 43 of the Financial Services Act 2012). Under section 234C(1), a designated body may make a complaint to the Financial Conduct Authority that a feature, or combination of features, of a market in the UK for financial services is, or appears to be, significantly damaging the interests of consumers. Further information is available in the accompanying explanatory memorandum: see here (pdf).

UK: The Financial Services (Banking Reform) Act 2013

The Financial Services (Banking Reform) Bill received Royal Assent today and is to be known as the Financial Services (Banking Reform) Act 2013: see here. A copy of the Act has not yet been published but will be available here soon.

Update (19 December 2013) - a copy of the Act is available here (pdf).

South Africa: introducing a 'twin peaks' model of financial regulation - consultation on draft legislation

The National Treasury has published for consultation draft legislation - the Financial Sector Regulation Bill 2013 - as part of its introduction of a twin peaks model of financial regulation, including the creation of new authorities (the Prudential Authority and the Market Conduct Authority): see here (pdf). Further background information is available here.

Europe: reform of the audit sector - political agreement reached

Yesterday, in trilogue, provisional agreement was reached on proposals to reform the audit sector: see here. Mandatory rotation after ten years has been accepted. However, after ten years the audit engagement can be extended for a further ten years (fourteen years in the case of a joint) if a tender takes places. This proposal does not go as far as the Commission originally recommended in November 2011.

UK: Financial Services (Banking Reform) Bill - Royal Assent expected tomorrow

The Financial Services (Banking Reform) Bill has completed its passage through the House of Lords and House of Commons. Royal Assent is now required for the Bill to become law, whereupon it will be known as the Financial Services (Banking Reform) Act 2013. Royal Assent is expected tomorrow.

UK: FRC review of auditors' consideration and application of materiality

The Financial Reporting Council has published the results of the first of two thematic inspection reviews undertaken by its Audit Quality Review team during 2013. The review examined auditors' consideration and application of materiality. The FRC's report identifies a number of key messages for audit firms and audit committees: see here (pdf). A short overview of the report is available here.

UK: Implementing CRD4 - the Capital Requirements Regulations 2013

As part of the UK's implementation of CRD4, the Capital Requirements Regulations 2013 were laid before Parliament on 10 December: see here or here (pdf). An explanatory memorandum is available here (pdf).

UK: Scotland: Liquidators lack the power to disclaim land

Last Thursday, in Re Scottish Environmental Protection Agency & Others [2013] CSIH 108, the Court of Session (Inner House) delivered an important decision concerning insolvency law in Scotland. Overturning the decision of the Lord Ordinary ([2013] CSOH 124), the court unanimously held that, in the absence of a specific power to do, a liquidator has no power to divest the company of a real right in land by unilateral disclaimer whereby the land would become bona vacantia.

OECD Corporate Governance Working Paper series, paper eleven: institutional investors as owners - who are they and what do they do?

The eleventh paper in the OECD Corporate Governance Working Paper series, titled Institutional Investors as Owners - who are they and what do they do?, has been published: see here (pdf).

UK: Financial Services (Banking Reform) Bill - return to the Lords today

The Financial Services (Banking Reform) Bill returns to the House of Lords today, as part of the process of ping pong. The House of Commons last week disagreed with an amendment made to the Bill in the Lords, requiring the creation of a licensing regime based on training and competence: see here (pdf).

UK: England: Monitor consultation on revised Code of Governance for NHS Trusts

Monitor - the regulator for health services in England - has recently consulted on a revised edition of its Code of Governance for NHS Trusts, to take effect from 1 April 2014: see here (pdf).

India: Insider trading law - proposed reforms published for consultation

The High Level Committee formed to review the SEBI (Prohibition of Insider Trading) Regulations, 1992, has published its report: see here (pdf). Views are sought on proposed changes to the legal framework governing the prohibition of insider trading, including widening the definition of 'insider'. An overview of the proposed changes is available here.

Canada: Corporate governance and the Canada Business Corporations Act

A review of the Canada Business Corporations Act, focusing on corporate governance, has been launched by Industry Canada: see here or here (pdf). Views are sought on a wide range of issues, including directors' remuneration, shareholder rights and board diversity.

UK: FRC publishes draft plan, budget and levy proposals for 2014/15

The Financial Reporting Council has published its draft plan, budget and levy proposals for 2014/15: see here (pdf). Views are sought on the priorities identified by the FRC. Amongst other things, the FRC is proposing to assess the quality of board succession planning and consider how to develop best practice. It is also proposing to undertake a review of the progress made by major audit firms in improving the auditing of banks and building societies.

UK: The Capital Requirements (Country-by-Country Reporting) Regulations 2013

The Capital Requirements (Country-by-Country Reporting) Regulations 2013 were laid before Parliament on 10 December and come into force on 1 January 2014. The Regulations transpose Article 89 (country-by-country reporting) of the Capital Requirements Directive (2013/36/EU). An explanatory memorandum is available here (pdf) and further guidance is available here.

UK: ICAEW paper - 'When is comply or explain the right approach?'

The ICAEW has published a third paper - titled 'When is comply or explain the right approach?' - as part of its Dialogue in Corporate Governance: see here (pdf).

UK: The Financial Services and Markets Act 2000 (Consumer Credit) (Transitional Provisions) Order 2013

The Financial Services and Markets Act 2000 (Consumer Credit) (Transitional Provisions) Order 2013 was laid before Parliament yesterday and will come into force on 31 December 2013. An explanatory memorandum is available here (pdf). The Order provides the FCA with certain powers in preparation for its new role in respect of consumer credit regulation.

UK: Financial Services (Banking Reform) Bill - ping pong today

The Financial Services (Banking Reform) Bill has completed third reading in the House of Lords. Ping pong is scheduled for today, during which the House of Commons will consider the amendments made to the Bill in the Lords.

USA: Restricting proprietary trading - final rules to implement the 'Volcker rule'

Final rules to implement the so-called Volcker rule (as found in section 13 of the Bank Holding Company Act, inserted by section 619 of the Dodd-Frank Act) have been published: see here (pdf). An overview of the rules is available here.

UK: FRC consults on FRSSE amendments

The Financial Reporting Council has published for consultation FRED 52, Draft Amendments to the Financial Reporting Standard for Smaller Entities (effective April 2008) - Micro-entities: see here (pdf). The proposed amendments reflect the changes introduced by the Small Companies (Micro-Entities’ Accounts) Regulations 2013.

UK: Grant Thornton's 2013 corporate governance review

Grant Thornton has published the 2013 edition of its annual review of FTSE350 company corporate governance: see here (pdf). According to the report, based on a review of the annual reports of 298 FTSE350 companies with year ends between June 2012 and April 2013, 57% of companies complied fully with the UK Corporate Governance Code. Where companies did not comply, the report found significant differences in the quality of the explanations for non-compliance and alternative arrangements in place.

Italy: Asset managers publish stewardship code

Assogestioni, the Italian association of asset managers, published a stewardship code earlier this year: see here (Italian and English, pdf). The Code's principles are based on EFAMA's Code for external governance - principles for the exercise of ownership rights in investee companies (here, pdf).

UK: Dissolved companies and bona vacantia

Section 1012 of the Companies Act 2006 provides that when a company is dissolved, all property and rights vested in or held on trust for the company immediately before its dissolution are deemed to be bona vacantia. Updated policy guidance about the operation of this provision was published by the Government last Friday: see here.

New Zealand: FMA publishes audit quality report

The Financial Markets Authority has published its audit quality review report for the year ended 30 June 2013, based upon an assessment of the internal quality control systems and individual audit files of nine audit firms: see here (pdf). Areas for improvement have been identified, including auditor independence and ethical issues; auditor quality monitoring; audit documentation and evidence; and the use of professional scepticism.

Bhutan: Corporate Governance Code for DHI portfolio companies

Druk Holding and Investments Ltd - to which shares in certain state-owned companies were transferred in 2007 - has published a corporate governance code for the companies in its portfolio: see here (pdf).

USA: Disclosure in the auditor's report - PCAOB reproposes changes for public comment

The Public Company Accounting Oversight Board is seeking views on re-proposed changes to auditing standards that would require, amongst other things, the auditor's report to include: [a] the name of the engagement partner who led the audit in the most recent period, and [b] the names, locations, and extent of participation (as a percentage of the total audit hours) of other public accounting firms that took part in the audit, and the locations and extent of participation of other persons (whether an individual or a company) not employed by the auditor who performed procedures on the audit. Further information is available here.

Gibraltar: Draft Companies Bill published

A command paper containing a draft Bill to revise, reform and consolidate Gibraltar's companies legislation into a new Companies Act was presented to Parliament earlier this week: see here (pdf). There is a short explanatory memorandum at the end of the paper. Comments on the Bill are invited by 17 January 2014.

Sweden: Corporate Governance Board seeks views on code

Earlier this year the Swedish Corporate Governance Board invited views from listed companies in respect of its Corporate Governance Code: see here (pdf). The deadline for submitting comments has been extended to 15 December 2013. Views were sought from companies in part because the Board's finding, outlined in it annual report, that improvements were needed in the quality of governance disclosures: see here (pdf). The Board initially planned to state whether reform of the Code was needed at a symposium scheduled for yesterday; the symposium will now take place on 10 February 2014.

UK: England and Wales: Solicitors' duty of care required disclosure to remuneration committee chair

The ICLR has provided a summary for the recent Court of Appeal decision Newcastle International Airport Ltd v Eversheds LLP [2013] EWCA Civ 1514: see here. The headnote reads: "Where solicitors were retained by a company to draft new contracts between the company and its executive directors the solicitors breached their duty of care to the company by simply carrying out instructions given by the directors on behalf of the company".

In the circumstances of the case, the court held that the solicitors' duty of care required them to give express, separate advice to the chair of the company's remuneration committee regarding the nature and effect of the changes made in the contracts. In his judgment, Lord Justice Rimer stated (paras. [80] and [81]):

I readily accept that in a conventional case in which a company authorises one of its executives to instruct a solicitor in relation to a company matter, being one in which the executive has no personal interest conflicting with that of the company but can simply be regarded as a human organ of the company, there will ordinarily be no need for the solicitors to give advice as to the matter the subject of their instruction to anyone other than the executive. Advice to him will stand as advice to the company. That, however, was manifestly not this case".

Ireland: Corporate law - reviews and recommendations

The Committee of Public Accounts, in its interim report on the stabilisation measures adopted in respect of the banking crisis, has called for a review of of the framework governing the investigation of directors suspected of wrong-doing, arguing that streamlining is required. The Committee has also called for a review, to be undertaken (it is suggested) by the Law Reform Commission, of the enforcement mechanisms available against individuals.

It is worth noting that the Law Reform Commission, in its recently published law reform programme, has included a project titled 'Corporate offences and regulatory enforcement', the purpose of which will be to consider whether the range of existing corporate offences are sufficient, including whether an offence of reckless trading should be enacted. The regulatory and enforcement powers of the Central Bank of Ireland will also be considered.

UK: Investor Forum to start operating next year

One of the recommendations made last year by Professor John Kay, in his report on UK equity markets and long-term decision making, was the creation of an investor forum. The forum was seen as one way to address the disincentives to engagement by asset managers with investee companies that arise from fragmented shareholdings. Today's Financial Times newspaper reports that the forum will start operating in June next year: see here.

Update (3 Dec 2013) - further information about the Forum was published today in a report by the Collective Engagement Working Group: see here (pdf). Further background information is available here.

Australia: Superannuation governance - discussion paper published

The Australian Government has published a discussion paper titled Better regulation and governance, enhanced transparency and improved competition in superannuation: see here (pdf). Amongst other things, questions are asked on the appropriate proportion of independent directors for superannuation boards and whether such boards should have independent chairs.

Greece: The Hellenic Corporate Governance Council's code for listed companies

The codes and principles directory maintained by the European Corporate Governance Council has been updated to include a copy of the corporate governance code for listed companies recently published by the Hellenic Corporate Governance Council: see here.

UK: The Small Companies (Micro-Entities’ Accounts) Regulations 2013

The Small Companies (Micro-Entities’ Accounts) Regulations 2013 were made on 28 November and came into force on 1 December: see here or here (pdf). The Regulations introduce exemptions from certain financial reporting requirements for very small companies and permit such companies to prepare and file abridged accounts. In doing so the Regulations partially implement European Directive 2013/34/EU and make changes to the Companies Act 2006. An explanatory memorandum is available here (pdf).

UK: Financial Services (Banking Reform) Bill complete report stage

The Financial Services (Banking Reform) Bill completed report stage in the House of Lords last week. It is scheduled to receive its third reading on 9 December 2013. A copy of the bill, as amended at report stage, is available here or here (pdf).

UK: KPMG's Guide to Directors' Remuneration 2013

KPMG has published its Guide to Directors’ Remuneration 2013, which presents an analysis of the pay of FTSE350 directors: see here (pdf).

Europe: European Supervisory Authorities' joint position - product oversight and governance processes

The European Supervisory Authorities - EBA, ESMA and EIOPA - have jointly published high-level principles on product oversight and governance processes within financial institutions: see here (pdf).

Singapore: MAS consults on changes to the Banking Act

The Monetary Authority of Singapore has published a consultation paper setting out proposed changes to the Banking Act: see here (pdf). MAS is proposing, amongst other things, to codify what it expects from banks with regard to risk management.

UK: The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) (No.4) Order 2013

The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) (No.4) Order 2013 was laid before Parliament yesterday and comes into force on 19 December 2013. An explanatory memorandum is available here (pdf). The Order makes, amongst other things, amendments to the Open-Ended Investment Companies (Amendment) Regulations 2011 (S.I. 2011/3049) in connection with the new financial regulatory regulatory regime introduced earlier this year.

UK: Scotland: The Employers' Liability (Compulsory Insurance) Act 1969 and director liability

In Richardson v Pitt-Stanley [1985] QB 123 a majority of the Court of Appeal in England concluded that the Employers' Liability (Compulsory Insurance) Act 1969 did not give rise to civil liability on the part of the employer or of a director of the employing company for the failure to have in place insurance covering bodily injury or disease sustained by employees in the course of their employment. Earlier this week, sitting in the Court of Session (Outer House), Lord Glennie delivered his opinion in Campbell v Peter Gordon Joiners Ltd. [2013] CSOH 181 and declined to follow Richardson. Noting that it was undesirable for the courts in England and Scotland to reach a different view on the effect of UK wide legislation, Lord Glennie nevertheless held that the Act not only created an obligation on the part of the directors of the employing company to ensure that insurance was in place but also gave a right to a person affected to sue the directors for a breach of that obligation. He also considered, but rejected, arguments for such a right based on the common law (and in doing so briefly touched upon directors' statutory duties under the Companies Act 2006).

UK: Financial Servies (Banking Reform) Bill - peers support annual validation of approved persons' competence as part of licensing regime

The Financial Services (Banking Reform) Bill began the first day of report stage in the House of Lords yesterday: see here. Peers voted (222 votes for; 217 against) to introduce an amendment to the Bill requiring all approved persons exercising controlled functions to undergo an annual validation of their competence, as part of a licensing regime based on training and competence. Report stage debate continues today.