​Welcome to your March round-up. We are bringing you highlights from the registry world, key dates for you to be aware of, all current and relevant industry updates and a market update provided by Georgeson.

This month we will cover:
Industry update
  • Dormant Asset Commission
  • FCA and ICO Publish Joint Update on GDPR
  • Income Tax: Dividend Allowance Reduction
  • Taylor Review Response
  • AGM Guidance
  • Insider Lists
  • High Court Finds Arranger of Capital Markets Transaction Owed Duty of Care to Investors
  • Global News
Georgeson market update
  • UK Activism
  • International Activism

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New wave of EU regulation

Take a look at our webpage about recent and upcoming regulatory change and its impact on registry services

Industry update

The UK government has released its response to last year's report by the Commission on Dormant Assets (found here).

The government has confirmed it agrees with the conclusion of the Commission that there is potential to expand the existing scheme and that it will adopt a similar approach as it has done previously; in that it will allow the expansion to be led by industry, with its role being to facilitate the expansion by considering legislative change where necessary.

The government's response recognises that non-cash assets may be subject to significant market variability in value, and therefore has encouraged that the expansion of the scheme initially focuses on cash assets and those assets that are not subject to such market variability. This may change depending on the arrangements put in place to allow for full restitution for a claimant.

The government is going to be appointing champions from a range of sectors to look into the expansion of the existing scheme, define dormancy within their sectors and consider other technical and practical considerations. It is also planning over the coming months to undertake an assessment of possible legislative amendments that may be required to support the expanded scheme.
The Financial Conduct Authority (FCA) and the Information Commissioner's Office (ICO) have published an update on the EU General Data Protection Regulation (GDPR). The FCA had received queries from financial services firms regarding a possible conflict between the GDPR and FCA rules. The FCA clarified this, stating that they 'believe the GDPR does not impose requirements which are incompatible with the rules in the FCA Handbook'. Moreover, the FCA stated how any industry concerns are being addressed, such as the recent GDPR Roundtable which was held jointly by both the FCA and the ICO.

The FCA also highlighted the Memorandum of Understanding, which has been in place since 2014, lays out the formal relationship and commitment to co-operation and co-ordination between both the ICO (who will regulate the GDPR) and the FCA.

The update can be found on the FCA website here.
In his Spring Budget 2017, the Chancellor announced that from 6 April 2018 the tax-free dividend allowance would reduce to £2,000 from the existing £5,000. This legislation was included in the Finance Bill 2017, which received royal assent on 16 November 2017.

The government stated that the aim of this policy is 'the total amount of income investors can receive tax-free is fairer and more affordable', due to the increases to the tax-free Personal Allowance and Individual Savings Accounts allowance.

Further information can be found here.

The government has published its response to the Taylor Review on modern working practices (found here) and four consultations that seek views on how to implement some of the recommendations.

There is already a general commitment from the government to pursue some of the recommendations now, with the consultations seeking views on other recommendations relating to;

  • Agency workers - Views are being sought on repealing law that allows agencies to employ workers at cheaper rates by allowing them to opt out of equal pay entitlements. Feedback is also sought on improving the transparency of information provided to those seeking work in terms of rates of pay and those responsible for paying them. The consultation can be found here and closes on 9 May 2018. 

  • Enforcement of employment rights - This consultation sets out proposals on, but not limited to, the enforcement of core rights (holiday and sick pay) and naming employers who fail to pay tribunal awards. The consultation can be found here and closes on 16 May 2018. 

  • Transparency in the UK labour market - Government is proposing that all workers be provided with a written statement containing basic information (holiday and sick pay entitlements) from the start of their employment, a new right to a payslip for all workers (including casual and zero hours workers), and the right to request a more predictable and stable contract. The consultation can be found here and closes 23 May 2018. 

  • Employment status - This consultation seeks views on a range of options to make it easier for employees and employers to understand their employment status and rights. The consultation can be found here and closes on 1 June 2018.
The Quoted Companies Alliance has produced high level guidance to assist company secretaries in supporting their Chairs at annual general meetings (found here).

The guide aims to provide helpful tips on how to prepare for annual general meetings, as well as on the Chair's general duties and powers, and how to conduct meetings.
Following the London Stock Exchange application to be classed as an SME Growth Market under MiFID II and the subsequent acceptance of this application, it has now been confirmed that AIM companies will be able to benefit from certain exemptions from current and future legislation passed by the EU.

Currently, the only exemptions are contained within the Market Abuse Regulation (MAR) which came into force in July 2016. Since MAR came into force, all AIM companies had been required to maintain full insider lists, but with the new status of AIM those companies listed on the market are now exempt from Article 18 if a company is still; 

  • Able to provide a reduced content insider list upon the request of the FCA; and
  • Ensure all individuals with access to the insider information acknowledge their duties and are aware of the sanctions.
In the recent case of Golden Belt 1 Sukuk Company BSC(c) v BNP Paribas, the High Court found that a bank arranging a publicly listed issue of debt securities owed a duty of care to investors, and that it had breached that duty.

This case concerned a new issue of certificates to raise money for a company registered in Saudi Arabia. The bank acted as the arranger and, following a default in payments due under the certificates, the court held that the bank had a duty to ensure that a transactional document providing the certificate holder with a claim against the underlying parties was properly executed.

The High Court stated that the decision to implement this duty was justified as it was limited and specific, and was based on the specific facts of the case. On this basis, it can be distinguished from future cases. However, the impact of this decision is yet to be seen.

This is the first time in English law that a duty of care has been found to be owed to investors by a bank which has assisted a borrower to arrange a publicly listed securities issue, and this principle could have a much wider application. Moreover, in light of this, and the commentary relating to other aspects of the transaction documentation discussed in the case, there are a number of implications for financial institutions to consider.

The judgement can be found on the Bailii website here.
Mandatory data breach reporting

Last year, the Australian federal government passed the Privacy Amendment (Notifiable Data Breaches) Act 2017 (found here) which came into effect on 22 February 2017. The act amends the Privacy Act 1988 and mandates that organisations provide notification where there are reasonable grounds to believe that an eligible data breach has occurred.

The amended act attempts to ensure organisations are more proactive in protecting data, implementing data breach response plans and in the protection of individuals whose data has been compromised. Under the amendment, a breach is deemed to have occurred where the data has been accessed or disclosed by/to unauthorised parties, or where unauthorised access or disclosure is likely and a reasonable person would conclude that such unauthorised access would likely result in serious harm to an individual.

Updated AML guidelines

A number of Hong Kong regulatory authorities, including the Hong Kong Market Authority (HKMA), have published revised guidelines in respects of anti-money laundering and counter-terrorist financing to take into account recent amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance which came into effect on 1 March 2018.

The amendments seek to:
  • Change the threshold of beneficial ownership from 'not less than 10%' to 'more than 25%' so as to align with international standards;
  • Introduce flexibility to measures permitted to be taken for verifying customer identity;
  • Permit financial institutions to rely on foreign financial institutions within the same financial group to perform customer due diligence.
The SFC's guidelines can be found here; the HKMA's guidelines can be found here and the Insurance Authority's guidelines can be found here.

Georgeson market update

Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group
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UK Activism​
The Financial Times has published a full-page article entitled Investing: activism enters the mainstream

"Traditionally seen as aggressive, a new wave of players is taking a different approach to getting a seat on the board."
The parliamentary Carillion joint inquiry has announced that Major shareholders views on Carillion collapse published

"At the end of January the Work and Pensions and Business, Energy and Industrial Strategy Committees wrote to major shareholders in Carillion, with questions on their interaction with the company and the timing and motivation of their share selloffs. The Committees publish their responses, which show a variety of different perceptions about Carillion among its institutional investors, and very different levels of engagement with the board." 

See here for the main Carillion joint inquiry page.
The Investor Forum has published its 2017 Review of Activities

“The Investor Forum is today publishing its 2017 Review of Activities, which identifies the companies with whom it engaged last year and provides an update on its stewardship activities. The Forum’s activities and approach are becoming valuable tools for shareholders to escalate concerns and address complex problems with UK-listed companies. The collective engagements that the Forum has undertaken have made a valuable contribution to rebuild trust between shareholders and company boards in a number of situations. 2017 saw a significant pick up in collective engagement activity: Members proposed 14 different company situations for collective engagement; 10 of those situations resulted in comprehensive engagement with companies; Details of 7 completed engagements are disclosed in the 2017 review and they are (in order of initiation): Amerisur plc, BT Group plc, IP Group plc, ECO Animal Health plc, Worldpay plc, Rio Tinto plc and London Stock Exchange plc.” 

The full document is available here.
​International Activism
The Financial Times reports that Vanguard creates new European stewardship team

"$5tn asset manager has faced criticism for failing to influence corporate policies." 

See here for the Vanguard announcement.​
Hermes argues that A trio of concerns set to dominate institutional investors' agendas at AGMs

"Institutional investors will be looking for companies to address concerns around their management of climate change, board diversity, and executive remuneration during this year's AGM season, says Dr Hans-Christoph Hirt, Head of Hermes EOS, the stewardship and engagement team at Hermes Investment Management."
The 30% Club has announced that Investors focus on diversity with growth of 30% Club UK Investor Group

"The 30% Club UK Investor Group has grown from 7 to 27 members and from £1.6 trillion to £10.5 trillion in assets under management. The initiative is now global, with significant groups in Australia and Canada as well as a new group forming in the US. The London Stock Exchange opening was followed by a panel discussion including Paul Polman, Hiro Mizuno, Mark Zinkula, CEO of Legal & General Investment Management and Hanneke Smits, CEO of Newton Investment Management, and attendees included a wide representation of asset owners and asset managers as well as CEOs and Chairs of UK plc companies."

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