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Equiniti Monthly Bulletin May 2023

EQ Monthly Bulletin - May 2023

Thursday, 4 May 2023

Keeping you up-to-date with industry changes and news impacting the world of share registration and employee share plans.

Welcome to our Monthly EQ Bulletin.

Thera Prins Thera Prins CEO - UK Shareholder Services

AGM season is once again upon us and those of you with December Year ends will have either already hosted or will be counting the days to your shareholder meeting, whilst those with March or June year ends will likely be in the final throws of making final arrangements for your event.

With the AGM in mind our bulletin this month highlights a continued focus on board diversity and inclusion as well as updated stewardship and voting guidelines, issued by the Pension and Lifetime Savings Association.

ESG is also in the spotlight with the government having published their Green Finance Strategy. In addition, we consider a report on the Electronic Execution of Documents issued by the Industry Working Group (IWG) and the joint statement issued by the Financial Conduct Authority and HM Treasury following the completion of a review of the criminal market abuse regime.

Financial Conduct Authority - Primary Market Bulletin 44

The Financial Conduct Authority (FCA) has published Primary Market Bulletin 44.

Read More: Primary Market Bulletin 44

This Bulletin deals with diversity and inclusion (D&I) on boards and executive management and regulatory announcements with multimedia content.

  • Preparing D&I disclosures. The FCA notes that Listing Principle 1 extends to establishing and embedding D&I reporting procedures, systems and controls to meet obligations, including under LR 9.8.6R(9), LR 14.3.33R(1) and DTR 7.2.8AR. Listed companies should retain records supporting the statement and numerical data in their annual financial reports. The Bulletin sets out steps the FCA expects listed companies to consider in preparing D&I disclosures on a comply or explain basis.
  • Monitoring D&I disclosure compliance. The FCA will periodically review annual reports to determine whether listed companies are meeting the disclosure requirements. If not, the FCA may request corrective action (such as enhancing disclosures in subsequent annual reports). In periodic reviews, the FCA aims to identify areas of concern and examples of good practice. On a failure to disclose D&I information or provide a clear explanation in an annual report as required, the FCA will request that the company publish this information via a RIS in line with the rules, as soon as possible after discovery. The FCA will use its full suite of powers and sanctions, where appropriate, and will consider where disclosures are potentially false, misleading or omit material facts.

Announcements with multimedia content. The FCA has noted that some primary information providers (PIPs) offer the ability for issuers to include multimedia content in regulatory announcements. The FCA outlines possible related risks in light of obligations under DTR 6.3.5R, DTR 8.4.22R and Article 17(1) of UK MAR that multimedia content should not form part of any regulated information submitted for dissemination. PIPs should consider the risk issuers may disseminate regulated information in a non-compliant format and the steps they can take to reduce the probability of this risk crystallising.

Parker Review: Update report on ethnic diversity on boards

The Parker Review Committee has issued an updated report detailing the 2022 voluntary census results of FTSE 350 companies on the ethnic diversity of their boards as of 31 December 2022 and outlining new targets.

Read More: EY-Parker-Review-2023

The latest report found that:

  • 96 FTSE 100 companies have met the Parker Review target, with at least one minority ethnic director on their boards (up from 89 in 2021). 49 companies have more than one minority ethnic director on their board. 18% of all FTSE 100 director positions are held by directors from a minority ethnic group.
  • FTSE 250 companies are making progress towards the 2024 deadline of appointing at least one minority ethnic director, with 149 companies (representing 67% of the companies that responded (up from 55% last year), and equivalent to 60% of all FTSE 250 constituents) meeting the target in 2022. Directors from a minority ethnic group hold 11% of all director positions within the FTSE 250 companies that responded. It should be noted that 224 companies in the FTSE250 responded to the request for information.

New targets have been set by the report, including:

  • Each FTSE 350 company will be asked to set a percentage target, by December 2023, for senior management positions (for this purpose, members of the Executive Committee and senior managers who report directly to them) that will be occupied by ethnic minority executives in December 2027. Given the wide variation in the share of ethnic minorities in the population in different regions of the UK, (54% of the population identify as white in London with 96% identifying as white in Wales) the Parker Review recognises that there can be no “one size fits all” target percentage for ethnic minority executives in senior management. Companies are also strongly encouraged to describe in their annual reports the management development plans they have in place to help create a diverse and inclusive pipeline of talent.
  • 50 of the UK's largest private companies (as defined by the FTSE Women Leaders Review) will be asked to provide ethnic diversity data from December 2023. These companies will set the target of having at least one ethnic minority director on the main board by December 2027. Each company will also be asked to set a target for the percentage of ethnic minority executives within its senior management team.

The report also notes that companies should seek to encourage as many of their employees as possible to self-declare their ethnicity to enable data to drive decision-making.

PLSA Stewardship & Voting Guidelines

The Pension and Lifetime Savings Association (PLSA) have released their updated Stewardship and Voting Guidelines for 2023.

Read More: Stewardship and Voting Guidelines 2023

The guidelines are designed to help pension fund trustees, investment managers and other institutional investors decide how to exercise their vote at Annual General Meetings (AGMs).

The following changes have been made to the guidelines issued in 2022:

Virtual AGMs – while there is an acknowledgement that virtual AGMs are required in exceptional circumstances the PLSA is not supportive of permanent virtual AGMs and believes that such meetings should allow for in-person attendance.

Board composition and diversity - When assessing the suitability of a new Chair, shareholders must consider board diversity. Investors should consider voting against the re-election of the Chair and Nomination Committee Chair if: the board consistently fails to move towards the PLSA recommendations of good company behaviour regarding board diversity or shows a lack of effort to do so, or the board fails to move towards the latest FCA diversity and requirements or satisfactorily explain such non-compliance. Investors should vote against the re-election of a director if there is no clear evidence that diversity is being sufficiently considered by the board, or where previously committed timescales are not being met, in the senior board positions.

Remuneration - Companies should exercise restraint in executive pay given the current economic situation. The Guidelines recommend remuneration structures and incentives for executive directors should cascade down to all employees to enable employees to share in the success of the business. They also encourage shareholders to vote against the remuneration policy where it does not match up to the standards in the guidelines.

Climate change. The PLSA has added to its list of questions investors should ask when deciding whether to support a particular climate-related resolution e.g. For say on climate and other shareholder voting resolutions, investors should consider whether the plans put forward for approval are underpinned by credible targets. Ideally, plans should reflect an established industry framework and be in keeping with the UK Transition Plan Taskforce (TPT) guidance.

Workforce. This is an entirely new section which details the PLSA's expectations about matters such as workplace health, well-being, modern slavery issues and Diversity, Equality and Inclusion. It specifies the situations where investors should consider voting against the approval of the annual report and accounts or the re-election of a relevant director. For example in situations where a company - identified as highly exposed to modern slavery risks - fails to demonstrate adequate risk management and a willingness to change their approach.

Climate Change – Green Finance Strategy

The Department for Energy Security and Net Zero (DESNZ) has published Mobilising green investment: 2023 green finance strategy which is an update to the government's 2019 Green Finance Strategy. The update focuses on the need for green investment and opportunities for the UK's financial and professional services, in light of the 2050 target of net zero.

Measures announced include:

  • Commissioning a transition finance market review to identify opportunities for the UK to become a leading provider of transition financial services.
  • Consulting on the introduction of requirements for the UK's largest companies to disclose net zero transition plans if they have them. The proposals for private companies will align closely with the FCA's requirements for listed companies to disclose transition plans, including the comply or explain basis. The government expects to consult in autumn or winter 2023 after the Transition Plan Taskforce (TPT) has finalised its framework.
  • Setting up a framework to assess the suitability for the UK of the global sustainability disclosure standards being prepared by the International Sustainability Standards Board (ISSB). The government will set up the framework for this assessment as soon as the ISSB's final standards are published, which is expected in the summer of 2023.
  • Delivering a green taxonomy for the UK, which will provide investors with definitions of which economic activities can be labelled as "green". This will support the standards, labels and disclosures for green financial products.
  • Exploring how the framework from the Taskforce on Nature-related Financial Disclosures (TNFD) should be incorporated into UK policy and legislation.

Further details are available in the following documents: Mobilising green investment: 2023 green finance strategy (, 2030 Strategic Framework for International Climate and Nature Action (

Electronic Execution of Documents - Industry Working Group Final Report

The Industry Working Group (IWG) on Electronic Execution of Documents has published their final report. It considers the challenges arising from the use of electronic signatures in cross-border transactions and how best to use electronic signatures to optimise their benefits when set against the risk of fraud and sets the Group’s further recommendations for reform out.

Read More:  Electronic Execution of Documents

The Report focuses on the following areas:

  • Challenges arising from the use of electronic signatures in cross-border transactions- Among other things, the IWG recommends that the UK considers adopting the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Signatures. The challenges include a lack of certainty as to whether electronic execution is valid or enforceable in a specific jurisdiction, risks relating to the enforcement of electronically signed documents, inconsistent definitions of and requirements for e-signatures in different jurisdictions and a lack of assurance that e-signing solutions and platforms meet different global requirements. The Report notes an ongoing need for education and reinforcement of the positive attributes of e-signatures; and
  • Potential solutions to protect signatories to deeds from the risk of fraud - The report highlights various protections which are or could be, offered to users by e-signature platforms. These include the provision of advice and guidance which can be recorded as evidence that it occurred, platforms can be configured to ensure all required steps are followed before the document is executed, accessibility of the platform through various devices which permit parties to review documents in advance of signing and electronic signing platforms which allow for the security of data to be maintained.

The report also includes recommendations for future reform which include recommendations for enhanced certification and self-certification, a uniformity of approach to electronic signing and online identification, a review of the law of deeds (with a view to the abolition of at least some of their current requirements) and the law of statutory declarations, and the establishment of a permanent body to focus on issues relating to electronic execution going forward.

Financial Conduct Authority and HM Treasury: Joint Statement: Review Of Criminal Market Abuse Regime

The Financial Conduct Authority (FCA) and HM Treasury have issued a joint statement following the completion of a review of the criminal market abuse regime.

Read More: Criminal market abuse regime review completion

Read More:  Joint HM Treasury and FCA statement on the Criminal Market Abuse Regime .

The review identified several areas where the government believes it would be appropriate to update the criminal regime although no details are given regarding those areas. The criminal regime has not been materially updated since it was introduced. This sits in parallel with the government's acceptance of the recommendations of the Fair and Effective Markets Review (FEMR) concerning market abuse, where the government will lay secondary legislation in 2023.

Changes to the criminal regime will be considered alongside any reforms to the retained EU law version of the Market Abuse Regulation (596/2014) (UK MAR)) through the Future Regulatory Framework (FRF) Review. As part of the FRF programme, the government intends to repeal UK MAR and it will consider how to take forward the recommendations from the criminal regime review at that point.

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