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FRC removes Tier 3 categorisation for Stewardship Code

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03 Aug 2017

The Financial Reporting Council (FRC) has announced that it has removed the tier 3 category of reporting against the principles of the Stewardship Code (“the Code”).

In November 2016, the FRC, announced a three tier system to assess signatories’ reporting against the Stewardship Code (link to the FRC website).  Signatories were categorised into tiers based upon the quality of reporting in their statements based on the seven principles of the Code and the supporting guidance.  The tiering exercise was undertaken in order to “improve the quality of reporting against the Code, encourage greater transparency in the market and maintain the credibility of the Code”.  Asset managers were categorised into three tiers and asset owner and service provider signatories were categorised into two tiers. 

Since the publication of the tiers, the FRC indicates that “the majority of signatories [have] significantly improved their statements”.  However some of them remained in tier 3 meaning that their reporting required further improvement.  Whilst some tier 3 companies improved their statements to either tier 1 or tier 2, the remaining signatories chose to remove themselves from the list of signatories.  As tier 3 does not demonstrate commitment to the objectives of the Code, the FRC has removed that tier leaving only tiers 1 and 2 which “show those willing to report transparently on their approach”.

The FRC will be undertaking a consultation on the Corporate Governance Code later in the year and this will include questions about its approach to the Stewardship Code including whether the tiers are set at an appropriate level.  A consultation on specific change to the Stewardship Code will also be published in 2018.

The press release is available on the FRC website.

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