New U.K. FCA Rules on Shareholder Engagement Come into Force

New U.K. FCA Rules on Shareholder Engagement Come into Force

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The FCA’s implementation of the revised Shareholder Rights Directive (SRD II) came into force today, 10 June 2019.

This was consulted on by the FCA in CP19/07 back in January with final rules being published in PS19/13 on 31 May. The main rules that will impact U.K. investment managers are as follows:

  1. To develop and disclose an “engagement policy” in line with COBS 2.2B.6 that sets out how the firm integrates shareholder engagement in its investment strategy;
  2. To publicly disclose on an annual basis how the engagement policy has been implemented, including a general description of voting behaviour and how votes have been cast (COBS 2.2B.7); and
  3. To make additional transparency disclosures on an annual basis to certain institutional investors as per COBS 2.2B.9. Note that the term “institutional investors” has been narrowly defined here to cover only life assurance companies and occupational pension schemes.

The first two requirements above apply on a “comply or explain” basis, with the third requirement being a binding requirement, albeit only when the types of investors mentioned are engaged. In all three cases, these rules apply to U.K. MiFID Investment Managers, Full Scope AIFMs and UCITS Management Companies, but do not apply to Sub-Threshold AIFMs unless they also fall into one of the other categories.

Due to the short time period between the publication of the rules and them coming into force, the FCA has stated that firms may comply for an “initial period” by publishing on its website that it is in the process of developing an engagement policy, or that it is considering whether to have one.

The new rules coming into force today can be found here:

In parallel to this, the FRC is also revising its Stewardship Code, which will necessarily mean that U.K. investment management firms also have to update their Stewardship Code disclosure under COBS 2.2.3. The proposed new code can be found here in Annex A, and it is understood this will be published in final form on 16 July 2019.


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Darren Mooney

Partner and Co-Head of Business Development

Darren Mooney is a Partner and the Co-Head of Business Development at Greyline. Before joining Greyline, Darren served as deputy chief compliance officer of Partner Fund Management where he held primary responsibility for the compliance program of the second-largest hedge fund in the Bay Area. Prior to that, Darren spent five years providing compliance consulting services at Cordium and then ACA Compliance Group, where he led the company’s San Francisco office and west coast operations. In addition to providing ongoing consulting services to a variety of investment managers, including hedge fund, private equity, venture capital, real estate, quantitative and other wealth managers, Darren also regularly guided clients through the SEC registration process, implemented tailored compliance programs, supported clients’ live SEC exams, and served as an SEC-mandated independent compliance consultant following an SEC enforcement action. Darren’s other experience includes serving as deputy chief compliance officer and associate counsel at F-Squared Investments where he directly supported the compliance program during the investigation and subsequent enforcement regarding historical advertising practices. Darren has a B.S. in Economics from the University of Delaware and a J.D. from Suffolk University Law School. He is a member of the Massachusetts bar.

Annie Kong

Partner and Head of Venture Capital
Annie Kong is a Partner and Head of the Venture Capital Division at Greyline. She provides ongoing compliance consulting to investment advisers and manages client relationships. Prior to joining Greyline, Annie was part of compliance and operations at a long-only manager-of-managers that advised pension fund clients. While there, she conducted compliance and operational due diligence on SEC-registered investment advisers on the platform. She also oversaw and counseled on various legal matters across the firm. Annie has a B.A. in Economics from the University of California, San Diego, and a J.D. from the University of San Diego School of Law. She is an active member of the State Bar of California.
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