Our views

New FCA rules for sovereign controlled companies still fall short of expected governance standards

Ashley Hamilton Claxton, Head of Responsible Investment

8 June 2018

While we are pleased that the Financial Conduct Authority (FCA) has listened to shareholder opposition to the original proposals, we still think that the new rules fall short of the high governance standards that investors expect in the UK. We worry about the possible consequences of the new listing category, especially in relation to the appointment of independent directors. The proposals from the FCA simply mirror the requirements for premium listed companies. We think the FCA should have strengthened the requirement, and given minority shareholders a binding vote on the independent directors at sovereign controlled companies.
We are also unsatisfied with the level of disclosure and scrutiny required for related party transactions, which carry a significant risk that company assets may be used for political purposes or public policy objectives, to the detriment of the company and its minority shareholders.

Past performance is no guide to the future. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.