FCA amends the DTR to implement the new EU Non-Financial Reporting Directive

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21 Nov, 2016

The Financial Conduct Authority (FCA) has made amendments to the Disclosure and Transparency Rules (DTR) to implement the new EU Non-Financial Reporting Directive (2014/95/EU) requirement for issuers to disclose their diversity policy in the corporate governance statement. Other aspects of the EU NFR Directive are to be implemented through changes to company law.

The EU NFR Directive was approved by the council of the European Union in September 2014.  It requires large public-interest companies (those with securities admitted to trading on a regulated market in the EU) to describe their diversity policy, covering age, gender, geographical diversity, and educational and professional background. Disclosures shall set out the objectives of the policy, how it has been implemented, and results.  If a company does not have a diversity policy it must explain why this is the case. 

The EU NFR Directive states that this information should be included as part of the corporate governance statement although UK companies often incorporate that statement into the directors’ report or strategic report by cross reference.  The requirements for a corporate governance statement are implemented in the UK through the DTR of the FCA.

The FCA has now introduced a new rule, DTR 7.2.8AR to implement the NFR Directive requirements on board diversity for UK companies with securities admitted to trading on a regulated market in the EU.  These are implemented through the Disclosure guidance and transparency rules sourcebook (miscellaneous amendments) instrument 2016 which came into force on 4 November 2016. 

Companies that meet the size criteria to qualify as small or medium-sized under company law are exempt from the new DTR requirement as indicated in the original consultation CP 16/17 (link to FCA website) in July 2016.  Additionally the new rules do not apply to issuers which do not have shares admitted to trading on an EU regulated market, unless the issuer has issued shares which are traded on an EU multilateral facility.  Listed companies which are required to comply with DTR 7.2 as if they were an issuer by LR 9.8.7AR, LR 14.3.24R or LR 18.4.3R(2) and who would qualify as small or medium if they were a company are also not in scope.

The Disclosure Guidance and Transparency Rules Sourcebook (Miscellaneous Amendments) Instrument 2016 (FCA 2016/70) and Handbook Notice No.38, which contains feedback on the consultation, are available on the FCA website.

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