Europe: new supervisory authorities for financial services - Council agreement

The Council of the European Union yesterday reached agreement in general terms regarding the formation of three new supervisory authorities for financial services - a Banking Authority, an Insurance and Occupational Pensions Authority and a Securities and Markets Authority - which will form part of a European System of Financial Supervisors. 

These new authorities will replace three existing committees of supervisors (CEBS, CEIPOS and CESR) and will comprise representatives from Member States' supervisory authorities. The day to day supervision of individual firms will remain the responsibility of Member States' regulators.

For further information see here (pdf).

France: gender equality on listed company boards

A report in the UK's Guardian newspaper states: "In a bill submitted to the French parliament this week, all companies listed on the Paris stock exchange would have to ensure female employees made up 50% of their board members by 2015. If passed, a gradual implementation of the law would see businesses obliged to have women in 20% of board seats within 18 months, and 40% within four years".

UK: the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2009

The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2009 were made on 30 November, laid before Parliament yesterday and come into force on 31 December 2009. The Regulations have been published on OPSI: see here (html) or here (pdf). In the accompanying explanatory memorandum their purpose is explained (paras. 7.1 to 7.3): 

The United Kingdom currently has a wider definition of market abuse than that established in the EU’s 2003 Market Abuse Directive. When the Treasury transposed the Directive, the main challenge was to decide how much change was appropriate to the civil market abuse regime that had been put in place as part of Financial Services and Markets Act (FSMA) in 2000. The FSMA regime and the Market Abuse Directive cover similar ground but adopt a slightly different approach to prohibiting abusive behaviour. The original FSMA regime defined market abuse in fairly broad terms and then qualified it by the requirement that behaviour is only abusive if it is likely to be regarded as such by a ‘regular user’ of the market. The Directive set out more specific descriptions of the type of behaviour that is to be prohibited.

On balance, it was decided to retain the scope of the existing market abuse prohibitions to the extent that these go beyond the prohibitions in the Directive (the new sections 118(4) and 118(8) of FSMA) but to make them subject to a sunset clause whereby the provisions would expire after a period of three years pending the outcome of a review by HM Treasury to assess whether they remain justified.

It was initially decided to extend the sunset clauses until 31 December 2009 until the outcome of the EU’s review of the Market Abuse Directive became known. This was done in the 2008 Regulations. The EU’s review of the Market Abuse Directive was subsequently delayed. The call for evidence was only launched on 20 April 2009, and the Commission has not yet published proposals to amend the Directive. It has therefore been decided to extend the sunset clauses further until 31 December 2011".

UK: the Financial Services Bill - second reading

The Financial Services Bill received its second reading on Monday and now proceeds to Committee stage: read the debate here. In the course of debate, the Chancellor referred to the recommendations within Sir David Walker's report on bank governance concerning the disclosure of pay within banks and stated (Hansard, 30 Nov, col 883):

Sir David made a number of recommendations, but I think that we go further than he suggested. We want to consult on regulations for narrower disclosure bands than he proposed, starting with salary packages below the £1 million floor that he suggested. We will consult on that idea, but most people are convinced that far more disclosure is important, because they will then be able to see precise remuneration practices".

UK: FRC consultation on changes to the Combined Code

The Financial Reporting Council has today published a final report following its review of the Combined Code on Corporate Governance. A consultation paper has also been published setting out proposed changes to the structure and content of the Combined Code, including the recommendation that it should be renamed the UK Corporate Governance Code. 

A copy of the proposed new Code is included in the consultation paper. It contains new sections on leadership and accountability and a greater emphasis is given to the long-term success of the company. For example, the recast preamble/introductory section begins:

The purpose of corporate governance, supported by the Code, is to facilitate efficient, effective and entrepreneurial management that can deliver growth in shareholder value over the longer term".

Amongst the FRC's other proposals are:

• the annual re-election of the chairman or the entire board
• new principles concerning leadership by the chairman and the role, skills and independence of the non-executive directors (including their time commitment)
• board evaluation reviews should be externally facilitated at least every three years
• the chairman should hold regular development reviews with each director
• new principles on the board's responsibility for managing risk.