On 22 November 2012, the Government issued its response to the findings of the Kay Review of UK Equity Markets and Long-Term Decision Making (‘the Kay Review’). To recap: the Kay Review, published in July this year, contained a number of recommendations to encourage market participants to make investment decisions based on enhancing the performance of UK companies and supporting long-term growth, and to restore relationships of trust and confidence in the investment chain.8

The Government supports the recommendations of the Kay Review and will now consider whether any changes to law or regulation will be needed to put its recommendations into practice. The Government reports that work to this end will also include the following:

  • seeking to end mandatory quarterly reporting in an attempt to reduce the excessive focus on short-term earnings;
  • endorsing clear minimum standards of behaviour for all investment intermediaries to ensure they act in the longterm best interests of their clients;9
  • encouraging industry to set up an Investors’ Forum to promote constructive engagement with companies; and
  • endorsing Good Practice Statements for directors, asset managers and asset holders to promote the need for:
    • trust-based relationships;
    • collective action by institutional shareholders;
    • improved disclosure of costs in the investment chain;
    • enhanced transparency and fairness in stock lending; and
    • closer correlation between pay and long-term performance.

The Government will publish an update with details of progress in the summer of 2014.

Ensuring equity markets support long-term growth: The Government response to the Kay Review available at:

http://www.bis.gov.uk/assets/biscore/business-law/docs/e/12-1188-equity-markets-support-growth-response-to-kay-review