UK: Royal Assent for the Local Audit and Accountability Act 2014

The Local Audit and Accountability Act 2014 became law yesterday, on the granting of Royal assent: see here. A copy of the Act is available here or here (pdf). Implementation and secondary legislation will follow - it was published for consultation last year - but the legal framework is now in place to bring about the abolition of the Audit Commission and introduce, in England, the new structure for the auditing of local public bodies. This new structure has obvious parallels with the model of accountability seen under the UK Corporate Governance Code. Compare, for example, the role of the audit committee under the Code with the requirement under the 2014 Act (section 9 and Schedule 4) for relevant authorities to appoint an auditor panel to oversee and advise on the maintenance of an independent relationship between the authority and its auditor.

UK: external board evaluations - draft code of practice published

A draft code of best practice for the conduct of independent external board evaluations has been published for discussion and comment: see here (pdf). The code has been prepared by the consultancy firm Advanced Boardroom Excellence and its purpose is to establish a coherent framework within which companies and consultancies can work together effectively.

Provision B.6.2 of the UK Corporate Governance Code 2012 provides: "Evaluation of the board of FTSE 350 companies should be externally facilitated at least every three years. The external facilitator should be identified in the annual report and a statement made as to whether they have any other connection with the company."

UK: FCA consults on changes to the Listing Rules and Prospectus Rules

The Financial Conduct Authority has published a consultation paper in which changes are proposed to the Listing Rules and Prospectus Rules: see here (pdf). Amongst the proposed changes are those relating to the competence of sponsors.

Isle of Man: High Court considers appointment and role of conflict liquidator

Earlier this week the High Court of Justice gave judgment in Malone v Mitchell (CHP 13/0140). This decision is noteworthy because it appears to be the first Manx decision to consider the appointment and role of a so-called conflict liquidator. The judge - His Honour The Deemster Doyle, First Deemster and Clerk of the Rolls - applied the approach adopted in the English High Court by Mr Justice Newey in Re York Gas Ltd [2010] EWHC 2275 (Ch) and held that in the case before him there where reasons for declining to appoint a conflict liquidator from within the same firm as the liquidator. Deemster Doyle observed (at para. 80): "I accept on the basis of Re York Gas that the appointment of an additional office-holder as conflict liquidator from the same firm or company as the liquidator can, in principle, sometimes provide a cost effective and efficient solution to a conflict in respect of the determination of a proof of debt". A summary of the judgment is available here (pdf).

EU: Structural reform of the banking sector - Commission proposals published

The European Commission today published its proposals for the structural reform of the EU banking sector. Included is a ban on proprietary trading by European banks of global systemic importance or those exceeding identified thresholds (€30 billion in total assets, and trading activities either exceeding €70 billion or 10 per cent of the bank's total assets).  Also published were proposals to increase the transparency of securities financing transactions: see here. For further information about the structural reform proposals, see: Commission press release | FAQs I | FAQs II | Proposed Regulation (pdf) | Citizens' summary (pdf) | Impact assessment: full text (pdf), executive summary (pdf), annexes 1 to 4 (pdf), annexes 5 to 14 (pdf). A video recording of the Commission's press conference is available below (and will be available for the next seven days):

BCBS identifies sound practices for bank capital planning

The Basel Committee on Banking Supervision has published a paper titled A Sound Capital Planning Process: Fundamental Elements - Sound practices: see here (pdf). The paper does not provide new capital planning guidance but instead presents examples of sound practices, based on observations at banks. A section in the paper deals with internal control and governance. In this section it is noted that there is considerable variation in how banks structure their capital planning processes; examples of board of directors involvement in capital planning are also included.

UK: Remuneration and the role of regulators - comments from the Bank of England Governor

The speech given last week by the Governor of the Bank of England, Mark Carney, at the World Economic Forum's annual meeting, has attracted much attention, particularly in respect of interest rate policy. But there was much else of interest in the speech, particularly with regard to financial regulation and the role of regulators. With regard to remuneration, Mr Carney stated: "... while regulators ... can determine the appropriate split of remuneration between fixed and variable elements to limit risks to financial stability, only society, not regulators, can determine whether the absolute and relative levels of compensation are acceptable". A copy of the speech is available here (pdf).

UK: Deregulation Bill introduced in Parliament

The Deregulation Bill was introduced in Parliament earlier this week. A copy of the Bill, as introduced, is available here or here (pdf). Explanatory notes for the Bill are available here or here (pdf). Clause 11 will amend Chapter 4, Part 16, of the Companies Act 2006 in respect of the reporting requirements imposed on auditors when ceasing to hold office. Clause 12 introduces various changes to insolvency and company law, set out more fully in Schedule 5.

UK: Consumer Rights Bill introduced in Parliament

The Consumer Rights Bill was introduced in Parliament today. A copy of the Bill, as introduced, is available here (pdf). Explanatory notes are available here or here (pdf). The main purpose of the Bill is to consolidate and amend the law in respect of the principal consumer rights covering contracts for goods, services, digital content and the law relating to unfair terms in consumer contracts.

UK: FRC publishes second audit quality thematic review findings and report

The Financial Reporting Council has published the findings for its second audit quality thematic review: see here (pdf). The review focused on two areas: the auditor's identification of and response to fraud risks; and the auditor’s consideration of laws and regulations. Areas for improvement were identified, including an increase focus by auditors on identifying fraud risk factors in both planning and conducting the audit. The report also identifies several areas for audit committees to consider in respect of their oversight of the audit process.

Europe: Court of Justice upholds ESMA's power to regulate or prohibit short selling in the Member States

The Court of Justice of the European Union gave judgment today in United Kingdom v Parliament and Council (Case C-270/12). The court held that the power of the European Securities and Markets Authority to adopt emergency measures on Member States' financial markets in order to regulate or prohibit short selling is compatible with EU law. The court's decision is an important one on the powers of ESMA and, more generally, the operation of the European System of Financial Supervision. A summary of the court's decision is available here (pdf).

UK: Rule 21.2 of the Takeover Code - practice statement published

The Takeover Panel has published a practice statement - number 27 - in which it clarifies the way in which the Panel Executive interprets and applies Rule 21.2 of the Takeover Code in relation to irrevocable commitments and letters of intent given by offeree company shareholders who are also directors of the offeree company in connection with an offer: see here (pdf).

Canada: OSC consults on new disclosure rules regarding female participation on boards

The Ontario Securities Commission has published for consultation amendments to disclosure rules which will require TSX listed and other non-venture issuers to provide information in respect of their policies regarding the representation of women on the board, the board's or nominating committee's consideration of the representation of women in the director identification and selection process, the issuer's consideration of the representation of women in executive officer positions when making executive officer appointments, targets regarding the representation of women on the board and in executive officer positions, and the number of women on the board and in executive officer positions: see here or here (pdf).

India: RBI forms committee to review operation of bank boards

India's Central Bank, the Reserve Bank of India, has formed a committee to review the operation of bank boards. The terms of reference are available here. The committee is expected to submit its report within three months of the date of its first meeting.

UK: Competition Commission statutory audit market services inquiry - remedy implementation timetable revised

The Competition Commission has revised the administrative timetable for remedy implementation in respect of its statutory audit services market inquiry: see here (pdf) and here (pdf). Consultation on the Commission's final Orders will now take place in the third quarter of this year, with implementation in the final quarter. This will permit the Commission to consider the implications of European audit reform proposals, political agreement in respect of which was reached last month.

Pakistan: SECP amends corporate governance code for listed companies

The Securities and Exchange Commission has amended its corporate governance code for listed companies: see here (pdf). Amendments have been made to the eligibility requirements for the chief financial officer and the head of internal audit.

Japan: draft stewardship code - copy in English now available

A copy in English of the draft stewardship code published by the Council of Experts for public comment is now available: see here (pdf).

UK: consumer credit regulation and the Financial Conduct Authority - legislative update

The Government published a short update yesterday with regard to the legislation being enacted to transfer consumer credit regulation to the Financial Conduct Authority: see here. The update focuses on two statutory instruments that were laid before Parliament on 14 January (both are subject to the affirmative procedure): see here.

UK: The Building Societies (Accounts and Related Provisions) (Amendment) Regulations 2014

The Building Societies (Accounts and Related Provisions) (Amendment) Regulations 2014 were laid before Parliament yesterday: see here or here (pdf). The Regulations come into force immediately after paragraph 5 of Schedule 9 to the Financial Services (Banking Reform) Act 2013 comes into force. The Regulations amend existing Regulations in order to remove the requirement for building societies to include in their annual business statement certain information relating to officers who are not directors. An explanatory memorandum is available here (pdf).

UK: England and Wales: section 1140 of the Companies Act 2006 creates 'parallel code'

Judgment was given a few days ago in Key Homes Bradford Ltd & Ors v Patel [2014] EWHC B1 (Ch). The decision is noteworthy because it the first to consider the operation of section 1140 ("Service of documents on directors, secretaries and others") of the Companies Act 2006. The trial judge held that section 1140 provided a basis for serving a director which was entirely outside the provisions for service in the Civil Procedure Rules: it created a "parallel code" (para. [25]). Moreover, the Companies Act 2006 created "[a] new regime for service of documents on directors ... intended to have a wide effect. It is not prima facie unfair that a director of an English company who resides abroad, but who gives an address for service in England, should be vulnerable to being served at that address as a choice, or a deemed choice, has been made" (para. [25]).

Europe: ESMA refusal to register credit rating agency upheld by Board of Appeal

The opinion of the Board of Appeal of the European Supervisory Authorities, in the first appeal against a decision of the European Securities and Markets Authority refusing an applicant registration as a credit rating agency, was given last week: see here (pdf). The Board confirmed ESMA's decision.

UK: PwC 2013 report on non-executive director fees

PwC has recently published its 2013 report on the fees received by non-executive directors: see here (pdf). According to the report's foreword, "... the board fee is beginning to plateau after some steep increases in the five years following the financial crisis".

Basel III - leverage ratio framework and disclosure requirements approved

The Basel Committee's oversight body - the Group of Governors and Heads of Supervision - yesterday endorsed the Committee's Basel III leverage ratio framework and disclosure requirements. For further information, see here.

Hong Kong: the disclosure of inside information

The Securities and Futures Commission has published a short report in respect of the disclosure of inside information by listed companies in 2013, under the new regime introduced a year ago: see here.

UK: Competition and Markets Authority - guidance published on exercise of powers

Guidance was published today by the Competition and Markets Authority regarding the manner in which it proposes to exercise some of its powers (including the power to impose penalties) when it formally comes into existence in April this year: see here. For further information about the role of CMA, see here.

UK: Competition Commission statutory audit services market inquiry - remedies addressed to the FRC - response from the FRC

The Financial Reporting Council has published the letter it has sent to the Competition Commission in respect of the remedies addressed to it as part of the Commission's statutory audit services market inquiry: see here (pdf). The letter sets out the FRC's response and states, amongst things, that a consultation will take place later this year with regard to changes proposed to the UK Corporate Governance Code. In respect of its proposed remedies, the Competition Commission is expected to publish a draft Order this month.

Australia: financial system inquiry - draft terms of reference - publication of submissions

Draft terms of reference for an inquiry into the Australian financial system were published last year by the Government for public comment: see here (pdf). Included for consideration were corporate governance structures and their affect on what is described as 'stakeholder interests'. Corporate law was also included where it impacts on the effective allocation of capital. The submissions received have now been published: see here.

Japan: panel recommendations to vitalise financial and capital markets

The panel formed to consider how to vitalise financial and capital markets published its recommendations at the end of last year. Some of these concern corporate governance. A copy of the recommendations, in English, is available here (pdf).

Portugal: CMVM corporate governance code recommendations - copy in English now available

The Portuguese Securities Market Commission, Comissão do Mercado de Valores Mobiliários, published a new edition of its corporate governance code last year: see here (pdf). A copy of the code, in English, is now available: see here (pdf).

Jersey: Codes of Practice for Investment Business

On January 1, new codes of practice for investment business came into force (including provisions regarding corporate governance): see here (pdf).

Luxembourg: ALFI's code of conduct for investment funds

The codes and principles directory maintained by the European Corporate Governance Institute has recently been updated to include a copy of the Code of Conduct for Investment Funds produced by the Association of the Luxembourg Fund Industry: see here.

Columbia: Framework Code of Good Corporate Governance for SMEs

The codes and principles directory maintained by the European Corporate Governance Institute has recently been updated to include a copy of the Framework Code of Good Corporate Governance for Small and Medium-Size Enterprises, published by CIPE and Confecámaras: see here.

Spain: new edition of the unified code of good governance for listed companies

The codes and principles directory maintained by the European Corporate Governance Institute was updated a few days ago to include a copy, in Spanish, of the Código Unificado de buen gobierno de las sociedades cotizadas (the unified code of good governance for listed companies): see here.

Japan: draft stewardship code published

The Council of Experts formed to develop a stewardship code for Japan is inviting comments on the draft code it published at the end of last month: see here (Japanese) or here (English). A copy, in English, of the proposed code has not yet been published but is expected soon.