The Financial Reporting Council (FRC) has published a consultation paper on a Stewardship Code for Institutional Investors (the Code). The FRC agreed to take on responsibility of oversight of the Code at the request of the Government, following Sir David Walker’s final report on the corporate governance of banks and other financial institutions in November 2009.

In the consultation paper the FRC is seeking views on:

Whether the code published by the Institutional Shareholders’ Committee in November 2009 provides a suitable basis for the Code, in either its existing or an amended form.

  • What the responsibilities for engagement of institutional shareholders and their agents are to the beneficial owners whose money they manage.
  • How adoption of the standards in the Code by UK and foreign investors can be encouraged.
  • What information investors should disclose on their engagement policy and practice.
  • What arrangements should be put in place to monitor how the Code is applied.

The deadline for comments on the consultation paper is 16 April 2010.

The Investment Management Association (IMA) has issued a press release stating that it welcomes the FRC’s consultation on the Code. Liz Murrall, Director of Corporate Governance at the IMA, commented:

"The IMA welcomes the FRC's Consultation on the Stewardship Code. The Code will help clarify institutional investors' responsibilities in engaging with companies. We support the Code being implemented on a ‘comply or explain' basis and providing beneficial owners and clients a choice as to the investment strategy they want their managers to adopt. The disclosure of investors' polices on engagement will help beneficial owners and clients make that choice.

We also support the proposals to monitor the application of the new Code. IMA has monitored engagement since 2003 through its annual Engagement Survey. The survey is well regarded and is supported by the industry. With suitable development it can provide the mechanism for monitoring the Code in the future. We look forward to working with the FRC and others on this."

View FRC consults on Stewardship Code for Institutional Investors, 19 January 2010

View IMA welcomes FRC’s consultation on the Stewardship Code for Institutional Investors, 19 January 2010