Equiniti ezine December 2012

EZINE > december 2012 inside this issue: Kay's principles for equity markets Government shows its support for the Kay Review by backing the 10 Principles for Equity Markets Equinti wins again The ESP Portal wins technology innovation award TRUST IN EQUINITI Temple Bar brings business back to Equiniti PLC Company Secretary Forum A very successful event focussing on the new narrative reporting and executive remuneration reporting requirements, gender diversity and effective AGMs

TRUST IN EQUINITI

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Kay review

The Government presents a formal response to the Kay Review of UK equity markets

Government Backs Kay’s Principles for Equity Markets The Government’s Department for Business Innovation and Skills (BIS) has formally responded to the Kay Review of UK equity markets, backing the 10 Principles for Equity Markets in its findings.

Business Secretary Vince Cable had earlier welcomed the report by Professor John Kay and in a formal response on November 22 he set out his support for the 10 principles outlined in the report. These focus on reversing the culture of short-termism and restoring relationships of trust and confidence in the investment chain. Dr Cable added that BIS will have regard to these principles in the future development of policy and regulation.

He said: “Many of us feel that in the past, our public companies and investors have focused on short-term profit at the expense of long-term value. That’s why I asked John

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Kay review Kay to look at what could be done to ensure equity markets support good, long-term decision-making. His insightful review calls for a shift in the culture of investment and sets a clear challenge to companies and those who invest in them.

“His agenda is an ambitious one but I am very encouraged by the level of engagement we have seen already from investors. Not only on Kay’s ideas, but through our directors’ pay and shareholder voting reforms; in addressing diversity on corporate boards and through changes to the way companies report their business strategy and results. These actions will help restore trust in markets and in the system of capitalism on which our future prosperity depends.”

The response looks in detail at each of the Kay Review’s 17 recommendations and highlights the steps being taken to deliver them, either through specific policy measures or by business and industry working together to develop good practice, including: ■■ Working with EU counterparts to end mandatory quarterly reporting and help reduce the excessive focus on short-term earnings

■■ Reforms

to corporate narrative reporting announced in October 2012 and coming into effect a year later ■■ An update of the Financial Reporting Council (FRC) Stewardship Code, incorporating an emphasis on questions of company strategy ■■ Endorsing clear minimum standards of behaviour for all investment intermediaries to ensure they act in the long-term best interests of their clients (though explicitly electing to avoid re-using Professor Kay’s term – ‘fiduciary duty’ – because of the different interpretations which can be put on it). The Law Commission has been asked to review the legal obligations on intermediaries to take appropriate longterm factors into account. The FSA has also been asked to ensure that the regulatory framework promotes high standards of behaviour throughout the investment chain ■■ Encouraging industry to establish an Investors’ Forum to champion constructive engagement with companies ■■ Endorsing Good Practice Statements for company directors, asset managers and asset holders, which emphasise the need for trust-based relationships and advocate more collective action by institutional shareholders; better disclosure of costs in the investment

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chain; increased transparency and fairness in stock lending; and better alignment between pay and long-term performance ■■ Welcoming the ICSA steering group developing a good practice guide to improve the quality of engagement activity, and to identify more effective means for companies and institutional investors to provide feedback on the quality of meetings.

The government fully accepts or supports the thinking behind 15 out of the 17 recommendations. One of the other two is Recommendation 14: Regulators should avoid the implicit or explicit prescription of a specific model in valuation or risk assessment and instead encourage the exercise of informed judgment, to which it responds, “This has potentially wide-ranging implications for regulatory policy and will therefore be considered in more detail by the relevant government departments and independent regulators, alongside the broader directions for regulatory policy”.

The other is Recommendation 17: The Government should explore the most cost effective means for individual investors to hold shares directly on an electronic register. The continued on page Page 3 4

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Kay review response is equivocal: “Government believes reducing intermediation costs and removing barriers to direct engagement for individuals wishing to hold shares electronically is a desirable policy objective. It will however be necessary to address this recommendation in the context of policy proposals relating to central securities depositories and securities law in the EU. This will include consideration of future arrangements for how investors can hold shares in a way that increases shareholder transparency and facilitates them exercising their shareholder rights, under the requirements set out in any final EU legislation.”

As far as companies and company secretaries are concerned, they will need to become familiar with the Good Practice Statement for Company Directors. Of particular importance in takeover situations, the response notes the changes already effected by the Takeover Panel in 2011 and addresses the duty of directors to promote the long-term success of the company for the benefit of its members.

Companies should also ‘consult major longterm investors over major board appointments’ and ‘seek to disengage from the process of managing short-term earnings, expectations and announcements’. The response also

links Professor Kay’s recommendations about executive remuneration and long-term performance incentives to the action already taken by the government.

The government committed to exploring whether changes in law or regulation are needed to deliver Kay’s principles in practice.

Interestingly, given the Red Tape Challenge climate – the Government recently upped its target to commit to removing two regulations for every new one which they introduce – very little detail focuses on immediate legislative action. Dr Cable recognises in the introduction, that this reflects Professor Kay’s contention that what is required is a cultural shift within the market and development of good practice in the investment chain rather than change imposed from outside. He also accepts that, although the principles have been broadly accepted, there has been ‘some scepticism about whether change is achievable’.

Delivering on this agenda will require a sustained commitment from Government, regulators and others. The Government will publish an update in Summer 2014 setting out the progress achieved in delivering Professor Kay’s recommendations.

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For more information: Please contact Peter Swabey at peter.swabey@equiniti.com or your relationship manager Equiniti’s ESP continued Portal Win on page Page 4 5

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Equiniti’s ESP Portal Win

Award-winning portal includes real-time dealing facility

Equiniti’s ESP Portal wins tech innovation award Equiniti is proud to announce that we have just won the award for Most Innovative Application of Technology in Financial Services at the Institute of Financial Services’ Innovation Awards.

Equiniti’s ESP portal, which includes a real-time dealing platform for share incentive plans, was launched in 2011 after extensive client input to increase employees’ awareness of and engagement with their employer’s share plans.

The market leading ESP Portal allows employees to view all their plan holdings and prices with real-time valuations, model different financial scenarios and transact and sell their shares easily.

It also benefits employers by providing greater employee awareness of their total reward package, whilst reducing their

administrative costs. The portal can also be customised thus giving a corporate look and feel.

Phil Ainsley, Employee Benefit Solutions Director at Equiniti, said: “We are delighted that the ESP Portal is being acknowledged for its innovation and benefit to employees.

Share plans are one of the most important elements of reward that employers offer.

However, in many instances employees often fail to recognise their value due to a lack of understanding and engagement. Our ESP Portal tackles that by allowing employees to see an aggregated view, get information about their share plans and transact through real-time access.”

Chris Ray, Director of Communications and Alumni Services at the ifs School of Finance, said: “The 15th annual Financial

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Innovation Awards was one of the most keenly contested yet, with nominees demonstrating outstanding creativity and innovation in their products and services. The judges were extremely impressed by the high standard of competition throughout every category and we would like to congratulate Equiniti on its truly impressive achievement.”

For more information Please contact John Daughtrey at john.daughtrey@equiniti.com or your relationship manager. continued Temple Bar on page Page 5 6

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Temple Bar

Investment trust brings business back to Equiniti after three year break

Temple Bar comes back to Equiniti Temple Bar Investment Trust PLC has come ‘home’ to Equiniti.

In November 2012 Equiniti Investment Services took over the administration of the Investment Trust Savings Scheme on behalf of the scheme manager, Investec. The scheme has around 2,000 participants.

In 2009 Temple Bar moved to another supplier after a change in Equiniti’s administration offering.

Since 2009 Equiniti has revised its approach to administration services and acquired business solutions provider peterevans. When Investec looked again for a new supplier Temple Bar felt these two factors combined to make a compelling case for returning to Equiniti.

Investec did look to the market to assess alternative options but their preference, in their words, was to ‘bring it home’ to Equiniti.

If you would like more information: Please contact Ian Leak at ian.leak@equiniti.com or your relationship manager

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PLC Company Secretary Forum

The Forum focused on the new narrative reporting and executive remuneration reporting requirements, gender diversity and effective AGMs

Equiniti stands out at the PLC Company Secretary Forum The first Practical Law Company (PLC) Company Secretary Forum, held on 20th November in association with the GC100, was undoubtedly a great success.

Guest speakers included Jo Swinson MP, who started the day with a keynote speech on the importance of the company secretary role and demonstrated a clear understanding of the key issues affecting the industry. The Rt Hon Baroness Bottomley spoke from a search and recruitment perspective on gender diversity and Richard Carter from the Department for Business Innovation and Skills provided the official view on narrative reporting and executive pay. Other leading representatives from top UK companies and Advisers who spoke at the forum included Linklaters, BP, Barclays and Smith and Nephew. Peter Swabey, Company Secretary and Industry Leadership

Director at Equiniti, discussed the voting process, how it works and how to overcome problems with complex voting chains and contributed to a lively panel discussion.

Over 200 delegates attended the forum and with such impressive speakers, the one-day event was both informative and productive. The Equiniti exhibition stand and banners that showed our status as the Number 1 provider of Shareholder Services, as voted for in the 2012 Shares Awards, certainly made us stand out from the competition!

For more information Please contact Peter Swabey at peter.swabey@equiniti.com or your relationship manager.

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