UK: The Prudential Regulation Committee

Tomorrow, on March 1, the Prudential Regulation Committee comes into existence: see here. The functions of the Committee are set out in section 30A of the Bank of England Act 1998 (as inserted by section 13 of the Bank of England and Financial Services Act 2016). It is responsible for the Bank's prudential regulation functions and replaces the PRA Board.

UK: Purposeful Company Task Force publishes its final report

The Purposeful Company Task Force was formed within the Big Innovation Centre under the direction of the Purposeful Company Steering Group. It was set up to consider how the UK governance and capital markets environment could be improved to support the development of value generating companies, acting with purpose to the long-term benefit of all stakeholders. The Task Force has published its final report - see here (pdf) - and this contains 22 recommendations within six policy areas: (i) company law and reporting; (ii) accounting for purpose; (iii) repurposing the investment management industry; (iv) blockholding; (v) finance for purpose; (vi) and executive remuneration.

In area (i) it is, for example, recommended that directors should be required to report on how they fulfill their obligations under section 172 ("Duty to promote the success of the company") of the Companies Act 2006. In area (iii) it is said that investors' responsibilities concerning stewardship should be clarified and oversight strengthened (and, more specifically, it is recommended that the FRC should set-up a review to investigate mechanisms for independently reviewing stewardship quality, to build upon the current tiering activities in relation to the Stewardship Code).

Singapore: MAS forms council to review corporate governance code

The Monetary Authority of Singapore has formed a council to review the Code of Corporate Governance: see here. The Code was last reviewed in 2012. The council's members - they are listed here (pdf) - have been asked, amongst other things, to consider how to make the 'comply or explain' framework more effective (including the quality of companies' disclosures) and how best to monitor companies' progress in implementing governance best practices.

Australia: Treasury consultation - the beneficial ownership of companies

Earlier this month the Treasury published a consultation paper seeking views on the reforms needed to increase transparency in respect of the beneficial ownership of companies: see here (pdf). Amongst the questions asked are those concerning the definition of beneficial owner, the creation and responsibility for a central register of beneficial ownership, and the obligations imposed on companies and beneficial owners. Responses to the consultation should be made here.

UK: Criminal Finances Bill - third reading in the Commons

The Criminal Finances Bill was introduced in the House of Commons last year and yesterday received its third reading: see here. The Bill now proceeds to the House of Lords for its first reading. The Bill contains, amongst other things, provisions that will introduce a new corporate offence of the failure to prevent the facilitation of tax evasion. Further background information about this new offence is available here. Draft Government guidance is also available: see here (pdf).

UK: The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017

A copy of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 is now available: see here or here (pdf). The Regulations come into force on 6 April 2017 and will require employers with at least 250 employees to publish annually four separate measures, based on employee data on 5 April, including the difference between the average (mean and median) hourly rate of pay for male and female employees.  Further information is available in the accompanying explanatory memorandum: see here (pdf).  It is also available in the joint guidance published today by the Government Equalities Office and the Advisory, Conciliation and Arbitration Service: see here, here, here and here.

Pakistan: update on the Companies Bill 2016

A copy of the Companies Bill 2016, as passed earlier this year by the National Assembly, is now available: see here (pdf). The Bill now requires Senate approval.

UK: England and Wales: the fraudulent director and attribution of knowledge to the company

The ICLR has provided a summary for a decision of the High Court - Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) - handed down last week: see here. To quote from the summary of the court's decision: "There was no principle of law that in any proceedings where the company was suing a third party for breach of duty owed to it by that third party, the fraudulent conduct of a director was to be attributed to the company if it was a one-man company. The answer to any question whether to attribute the knowledge of the fraudulent director to the company was always to be found in consideration of the context and the purpose for which the attribution was relevant".

UK: FCA review of the effectiveness of primary markets

The Financial Conduct Authority has begun a review exploring the effectiveness of the UK's primary markets. Two papers have been published.  The first, a consultation paper, seeks views on proposed changes to the Listing Rules: see here (pdf). The second is a discussion paper and its purpose is to begin more general discussion. Amongst the issues explored in this second paper, available here (pdf), is the boundary between premium and standard listings and whether a new market segment should be developed for overseas companies wishing to list in the UK (and the governance standards that they should meet).

IOSCO research report on financial technologies

The International Organisation of Securities Commissions has published a research report on financial technologies: see here (pdf). The report highlights the impact on investors and financial services of financial technology as well as indicating how regulators across the world are responding. A summary of the report is available here (pdf).

UK: FRC plans for a 'fundamental' review of the UK's Corporate Governance Code

The Financial Reporting Council has today formally announced (having already indicated what was to come) its plans for a 'fundamental review' of the UK Corporate Governance Code: see here. The FRC has also provided information about its newly formed Stakeholder Advisory Panel. The Panel will have a role in guiding the FRC's review of the Code, although it's not yet clear what this will precisely entail (for example, will the Panel have primary responsibility for determining the terms of reference of the FRC's review?).

It is, perhaps, surprising that nothing is said about the Stewardship Code in the FRC's announcement. Can a fundamental review of the UK's Governance Code be complete without also considering an important aspect of its enforcement through 'comply or explain' and what is expected of investors? These matters were mentioned in a speech yesterday by the FRC's chairman, Sir Winfried Bischoff, but it appears that they are not to be considered. To quote Sir Winfried: "In pursuing any changes [to the Code], the current strengths of UK governance, the unitary board, strong shareholder rights, the role of stewardship and the “comply or explain” approach, must be preserved we believe".

Germany: Commission publishes revised Corporate Governance Code

Last year the Corporate Governance Code Commission consulted on proposed amendments to the German Corporate Governance Code. The consultation period has ended and the Commission has now published the final amendments it will make to the Code: see here (in English).  A copy of the new Code, in German, is available here. A copy of the new Code, in English, has not yet been published.

Of interest are the amendments being made to the Code's preamble. The revised preamble explains that good governance, based upon a social market economy, requires more than adherence to the law: it requires ethical behaviour from the 'honourable business person' (Ehrbarer Kaufmann). The preamble also stresses what is expected from institutional investors: they should exercise their rights actively and responsibly, respecting the concept of sustainability.

Update (7 May 2017) - on 21 April the new edition was published in the Federal Gazette: see here.

UK: FRC publishes update on developments in audit

The Financial Reporting Council has today published an update in relation to its audit work (and its role as the competent authority for audit): see here (pdf). The update notes that some investors have raised concerns that not all audit firms serve investor interests in dealing with perceived conflicts of interest. It is also explained that in 2017/18 the FRC will review the effectiveness of the governance and culture of the eight firms adopting the Audit Firm Governance Code.

UK: Work and Pensions Committee advocates governance reforms

The House of Commons Work and Pensions Committee has published a report, based on its BHS inquiry, in which it responds to the Government's corporate governance green paper: see here. The Committee's report contains three principal recommendations, including extending the reach of the UK Corporate Governance Code (on a comply or explain basis) to large private companies and adding pension scheme trustees to the list of matters to which directors must have regard in the context of their duty to promote the success of the company under section 172 of the Companies Act 2006.

Taiwan: corporate governance best practice for TWSE/TPex listed companies

Last year the Taiwan Stock Exchange published an amended edition of its Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies. A copy of the new edition is now available in English: see here.

Pakistan: a further update on the Companies Bill 2016

The Companies Bill 2016 became law very briefly last year when it was promulgated by the President in the exercise of a power provided by Article 89 of the Constitution. However, the Ordinance was subsequently repealed by a vote in the Senate in December (see here, pdf) and the Bill subsequently introduced in the National Assembly. The Securities and Exchange Commission reports that the National Assembly approved the Bill earlier this week: see here (pdf). A copy of the Bill as passed should be available here soon.

Hong Kong: consultation on a register of beneficial ownership for companies

Earlier this year the Financial Services and the Treasury Bureau published a consultation paper on proposed reforms to the Companies Ordinance that would require all companies incorporated in Hong Kong (including unlimited companies, those limited by shares and by guarantee) to obtain and maintain beneficial ownership information for public inspection: see here (pdf). The intention is that listed companies should be exempt from these new requirements because they are already subject to a requirement under the Securities and Futures Ordinance to keep a register of interests in shares.

Denmark: Stewardship Code (copy in English now available)

Towards the end of last year, the Committee on Corporate Governance published recommendations regarding active ownership by institutional investors (aka a stewardship code): see here (Danish, pdf). The recommendations - there are seven of them - seek to promote long-term value creation; they came into effect at the start of last month and a copy of them in English is now available: see here (pdf).

UK: FRC best practice guidance notes on audit tendering

The Financial Reporting Council has published updated best practice guidance notes on the audit tendering process: see here (pdf).

Netherlands: Governance Monitoring report now available in English

The Dutch Corporate Governance Code Monitoring Committee published its annual governance code monitoring report at the end of December. A copy of the report, which found compliance with the code high, is now available in English: see here (pdf).

UK: insurance linked securities - FCA consults on Handbook changes

The Financial Conduct Authority is consulting on proposed changes to the FCA Handbook in respect of the new regulatory framework for insurance linked securities: see here (pdf). It is proposed, amongst other things, that insurance special purpose vehicles should be subject to SYSC 3 and that the Principles for Businesses should be amended to include activities directly arising out of the new regulated activity of insurance risk transformation.

India: IRDA consults on Stewardship Code for Insurers

The Insurance Regulatory and Development Authority of India has published for comment a Stewardship Code for Insurers. The Code contains several principles, the purpose of which (to quote the IRDA) is to "strengthen the role of insurers as stewards on behalf of the policyholders". For further information, and a link to the Code, see here. Like many (if not all) of the Stewardship Codes that have been developed in recent years, the emphasis is on the disclosure of information. Under the proposed Code, insurers' boards are required to approve a policy based upon the Code's principles.

USA: ISG publishes governance and stewardship principles

The Investor Stewardship Group, comprising some of the largest USA based institutional investors and global asset managers, was formed to establish a framework of basic standards for investment stewardship and boardroom conduct. The Group yesterday published its Stewardship Principles and Corporate Governance Principles for US Listed Companies: see, respectively, here and here.