Isle of Man: FSC consults on draft Register of Authorised Auditor Regulations

The Financial Supervision Commission has published for consultation draft Regulations the purpose of which, amongst other things, is to introduce a public register of all audit firms authorised under section 14E of the Companies Act 1982 and the requirement for such firms to submit an annual report to the Commission. Further information is available here.

IAASB re-releases for consultation amended ISA 720 (Auditor responsibilities relating to other information)

The International Auditing and Assurance Standards Board has re-released for consultation an amended version of International Standard on Auditing (ISA) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information: see here (pdf). The purpose of the proposed standard is to clarify and strengthen the scope of auditor responsibilities in respect of information in annual report other than the audited financial statements. Background information is available here.

Canada: Securities regulators consult on proxy advisory firm guidance

The Canadian Securities Administrators have published for consultation Guidance for Proxy Advisory Firms: see here (pdf). The guidance applies to all proxy advisory firms. It is not intended to be prescriptive but rather to provide a starting point for firms in developing and implementing their own practices with regard to various matters including conflicts of interest, the transparency of vote recommendations and communications with clients.

UK: Tribunal considers section 393 of the FSMA 2000

The operation of section 393 ("third party rights") of the Financial Services and Markets Act 2000 was considered earlier this month by the Upper Tribunal (Tax and Chancery Chamber) in Macris v Financial Conduct Authority: see here (pdf). Judge Timothy Herrington observed (at para. [35]): "The true purpose of s 393 is to give third parties whom the Authority is proposing to criticise the opportunity to answer those criticisms before they are published. The section gives a right to make representations in private and it is not acceptable to say that because the individual referred to cannot be easily established by reference to external sources, therefore ordinary readers of the notice will not be able to see that he has been criticised and therefore his rights can be dispensed with".

UK: FRC consults on proposed changes to the UK Corporate Governance Code

The Financial Reporting Council has published a consultation paper setting out proposed changes to the UK Corporate Governance Code: see here (pdf). A summary of the proposed changes, which focus on remuneration, risk management and going concern, is available here.

India: SEBI publishes new corporate governance norms

Earlier this year the Securities and Exchange Board of India met and agreed changes to the Equity Listing Agreement in respect of the corporate governance norms for listed companies. These new norms, which are found in Clauses 35B and 49, have now been published: see here (pdf). The revised Clause 49 applies to all listed companies from October 1, 2014.

UK: Deterrent effect warrants substantial penalty, Tribunal holds

Judgment was given earlier this month by the Upper Tribunal (Tax and Chancery Chamber) in Khan v Financial Conduct Authority: see here (pdf). The Tribunal directed that it was appropriate for the FCA to fine Mr Khan £80,000 for his failure to act with integrity, as required by Principle 1 of the Statements of Principle and Code of Practice for Approved Persons, by submitting a personal mortgage application containing false income details. In doing so, the Tribunal held that a substantial financial penalty was required for reasons of deterrence given the prevalence of mortgage fraud and its potential effect on the stability of the financial system.

UK: Transparency and trust consultation - Government response published

The Government has published the actions it proposes to take following consultation on its transparency and trust discussion paper: see here (pdf). The proposals include the creation of a registry of company beneficial ownership information, supported by a new obligation on all companies to identify significant beneficial owners (those with shares, or voting rights, providing an interest greater than 25%). The register will be held at Companies House and will be publicly available. All companies, on incorporation, will be required to provide an initial statement of beneficial ownership.

Other proposals include the prohibition of bearer shares and, subject to certain exemptions, prohibiting corporate directors (i.e., companies acting as directors). Other proposals relate to directors' duties, directors' disqualification and the information received by new directors on appointment. The Government's response states, for example, that there is a case for making it explicit in legislation that the general statutory duties of directors apply to shadow directors. Replacing Schedule 1 of the Company Directors Disqualification Act 1986 with a broader and more generic statement of factors relevant to determining unfitness is also proposed.

UK: Company filing requirements - reforms announced

The Government has published the reforms it proposes to make in respect of company filing requirements, following a consultation last year: see here (pdf). On proposal concerns the registers that private companies must currently keep. The Government is proposing to give such companies the option of not keeping any (or all) of the following registers: the register of directors; directors’ residential addresses; secretaries; members; and the proposed register of beneficial ownership. If this right is exercised, the information currently required must be kept up to date on the company's public register.

UK: FRC publishes plan and budget for 2014/15

The Financial Reporting Council has published its plan and budget for 2014/15: see here (pdf). With respect to governance and stewardship, which form only one part of the FRC's activities, the following actions are identified: updating the UK Corporate Governance Code with regard to risk management, going and concern and remuneration; encouraging improvements in the quality of explanations where boards choose not to comply with a Code provision; working closely with investors to ensure that they have the information they need to take a long-term view of a company’s prospects and encouraging fund managers and asset owners to explain how they are engaging with the companies in which they invest.

Europe: Parliament adopts Directive on disclosure of non-financial and diversity information by large companies and groups

The European Parliament has recently adopted the Directive on the disclosure of non-financial and diversity information by large companies and groups. The Directive, by amending Directive 2013/34/EU, will require, amongst other things, companies to provide information about their policy on board diversity (although it does not prescribe what that policy should contain). For further information see the press release and FAQS: here and here.

UK: director disqualification reforms

Although no formal announcement has been made on the website of the Department for Business, Innovation and Skills, it is being reported in the media that the Government will be introducing changes to the directors' disqualification regime: see here (BBC News) or here (The Guardian newspaper). The Government sought views on possible changes last year in its discussion paper Company ownership: transparency and trust.

New Zealand: FMA calls for improvements in disclosure of fees paid to auditors by listed issuers

The Financial Markets Authority has published the results of its review of the disclosure of fees paid to auditors by listed issuers: see here (pdf). The review noted that some companies' disclosures made it difficult to determine the fees relating to the audit of the financial statements and those paid for other services. It was also noted, in a large number of the financial statements reviewed, that the amount paid to the auditor for the audit of financial statements and the descriptions of the nature of other services provided by the external auditor could be more clearly identified.

Jersey: States approve the Financial Services Ombudsman (Jersey) Law

Earlier this month the States of Jersey adopted the Financial Services Ombudsman (Jersey) Law, which now awaits the approval of the Queen in Council. Hansard, the record of debate, is available here (pdf). The law creates a new ombudsman scheme to consider complaints from customers of Jersey financial services providers and will operate in conjunction with Guernsey.

Europe: EMIR - ESAs consult on draft regulatory standards

The European Supervisory Authorities have begun a consultation on draft Regulatory Technical Standards in respect of the European Market Infrastructure Regulation (EMIR).  The draft Standards cover the risk management procedures for counterparties in non-centrally cleared OTC derivatives, the criteria concerning intragroup exemptions and the definitions of practical and legal impediments. The consultation paper is available here (pdf).

Ireland: Supreme Court considers legal status of club

Earlier this month the Supreme Court gave judgment in Dunne v Mahon [2014] IESC 24. The decision is noteworthy because of the discussion it contains regarding the legal status and rules of an unincorporated association (a club). Mr Justice Clarke observed: "While a club is ... in one sense, no more than a set of interlocking mutual contractual relations between its members, it does have a form of existence which goes beyond that and which is subject to the jurisdiction of the courts".

UK: England and Wales: Court of Appeal considers section 235 definition of 'collective investment scheme'

The Court of Appeal gave judgment last week in Asset Land Investment Plc v The Financial Conduct Authority (FCA) [2014] EWCA Civ 435. This is an important decision on the definition of a collective investment scheme under section 235 of the Financial Services and Markets Act 2000. In particular, the court considered the meaning of 'arrangement' as used in section 235. Lady Justice Gloster (with whom Lady Justice Sharp and Lord Justice Rimer agreed) stated (paras. [50] and [52]):

The authorities demonstrate that, when interpreted together, sections 235(1), (2) and (3) are drafted in such a way as to justify the giving of a very wide meaning to term "arrangements" in section 235(1), which includes understandings and agreements that are not legally binding ... I cannot accept [the] submission that in order for an 'arrangement' to exist, there has to be "a mutual expectation of adherence" to be represented arrangements. The existence of "arrangements" for the purposes of section 235 cannot depend upon what might be an involved investigation into the subjective intentions and expectations of a representor, whose representations have caused investors to reach certain understandings. Such an approach would unduly and illogically restrict the ambit and effect of section 235".

OECD begins review of its Guidelines on Corporate Governance of State Owned Enterprises

The OECD has begun a review of its Guidelines on Corporate Governance of State-Owned Enterprises: see here. A revised draft of the Guidelines will be published next month. Final discussion is expected in the autumn, with the revised Guidelines being summited to the OECD Corporate Governance Committee for approval in November.

Australia: Corporations Legislation Amendment (Deregulatory and other measures) Bill published for consultation

The Australian Treasury has published for consultation a draft of the Corporations Legislation Amendment (Deregulatory and other measures) Bill 2014: see here (pdf). Explanatory notes are available here (pdf). Amongst other things, the Bill will remove from section 249D of the Corporations Act 2001 the requirement for an annual general meeting to be held at the request of at least 100 shareholders. Another amendment concerns section 300A of the 2001 Act and will require listed entities to include in their remuneration report a general description of their remuneration framework (to the extent that it is not included elsewhere in the annual report).

BCBS update on Basel III implementation and capital requirements for bank exposures to central counterparties

The Basel Committee on Banking Supervision has published an update regarding implementation of the Basel III regulatory reforms: see here (pdf). The Committee has also published its final standard Capital requirements for bank exposures to central counterparties: see here (pdf).

Europe: Commission publishes governance proposals - remuneration, shareholder rights, disclosure, Societas Unius Personae

The European Commission has today published a proposal for revising the Shareholder Rights Directive, a Recommendation on corporate governance reporting and a proposal for a Directive on single member private limited liability companies: see here.

The proposed revisions to the Shareholder Rights Directive include changes to the disclosure obligations in respect of a remuneration and the introduction of a binding vote on remuneration policy for certain companies. It also imposes new disclosure obligations on proxy advisors and the requirement for shareholder approval of certain related party transactions. For further information see: FAQs | Proposed Directive (pdf) | Impact assessment: summary (doc) and full text (doc).

The purpose of the Recommendation is to provide guidance on improving the quality of corporate governance reporting for those companies required to publish a corporate governance statement under Article 20 of Directive 2013/34/EU. A copy of the Recommendation is available here (doc).

The proposed Directive on single member private limited liability companies will require Member States to make available, through their individual legal systems, a single member private limited liability company, with several harmonised features and a common name (Societas Unius Personae, or SUP). The SUP would have a minimum capital requirement of one euro. For further information see: FAQs | Proposed Directive (doc) | Impact assessment: summary (doc) and full text (doc).

New Zealand: Financial Markets Conduct Act 2013 - phase one comes into force

The first phase of the Financial Markets Conduct Act 2013 came into force earlier this month. An overview of the changes which have come into force is available here.

OECD report: corporate governance and risk management

The OECD has published a report in which it reviews the corporate governance framework and risk management practices in 27 jurisdictions: see here (pdf). The report focuses, in particular, on Norway, Singapore and Switzerland.

UK: "The age of asset management?" - a speech by Andrew Haldane

Andrew Haldane, currently the Executive Director for Financial Stability at the Bank of England but soon to become the Bank's chief economist, delivered a speech today titled "The age of asset management?" in which he identified the risks posed by the asset management industry to financial stability, and the associated policy implications. A copy of the speech is available here (pdf). A summary is available here.

UK: The Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014

The Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 were laid before Parliament yesterday. An explanatory memorandum is available here (pdf). The Regulations implement in part the provisions relating to capital buffers in Directive 2013/36/EU; they also make amendments to the Bank of England Act 1998 to specify the procedure for notifying proposed macro-prudential measures under Article 458 of Regulation (EU) No 575/2013.

Europe: Parliament adopts statutory audit reform proposals

The European Parliament, in plenary session, has adopted legislative proposals to reform the EU statutory audit market. The proposals - in the form of a Directive and Regulation - now require formal adoption by the Council, expected later this month. Publication of the legislation is expected in the Official Journal within the next three months. For further information about the proposals, which include the introduction of mandatory audit firm rotation, see here.

UK: England and Wales: what is a collective investment scheme?

A copy of the judgment Financial Conduct Authority v Capital Alternatives Ltd [2014] EWHC 144 (Ch) was added to the BAILII database yesterday. The trial judge, Mr N Strauss QC (sitting as a deputy judge), held that several investment schemes were collective investment schemes under section 235 of the Financial Services and Markets Act 2000. In doing so he considered several important elements of the section 235 definition including the pooling of profits and "managed as a whole". The latter, he observed, did not require the complete absence of any element of individual management.

BCBS guidelines on the external audits of banks

The Basel Committee on Banking Supervision has published guidelines concerning the external audits of banks: see here (pdf). The guidelines cover two core areas: the audit committee's responsibilities in overseeing the external audit function; and the prudential supervisor's relationship with the external auditors and audit oversight body.

The guidelines replace two existing publications: The relationship between banking supervisors and banks' external auditors and External audit quality and banking supervision.

Australia: ASX publishes third edition of its Corporate Governance Principles and Recommendations

The ASX Corporate Governance Council has published the third edition of its Corporate Governance Principles and Recommendations: see here (pdf).  An overview of the changes introduced in the third edition is available here (pdf). There are nine new recommendations, some of which were previously included in commentary. It is now recommended, for example, that the external auditor attend the annual general meeting.

India: Companies Act 2013 provisions coming into force today

Many of the provisions within the new Companies Act 2013 come into force today: see here (pdf). The rules, circulars, notifications and orders made under the Act are available here.