Investors expected to adopt voluntary code of conduct on ‘comply or explain’ basis
The Hong Kong Securities and Futures Commission (SFC) has launched a public consultation on seven ‘principles of responsible ownership’ meant to form a stewardship code to guide investors’ dealings with the companies they invest in and the investors’ clients.
Under the principles, which are modeled on the UK Stewardship Code, investors will be asked to establish policies for ‘discharging their ownership responsibilities’ and report them to all stakeholders, according to an outline published on the SFC website.
The principles, open to public consultation for three months, are non-binding and voluntary but are meant to operate on a ‘comply or explain’ basis, so investors that do not adopt the code will be requested to disclose information as to why they haven’t complied with one or more of the principles. To sign up to the principles, investors will simply be required to disclose publicly that they have done so.
Investors will also commit to monitoring and engaging with the companies they invest in, establishing clear policies on when to intensify engagement with companies, creating clear policies on voting at shareholder meetings and being ‘willing to act co-operatively with other investors when appropriate’.
The principles call on institutional investors to report to their stakeholders on how they are fulfilling their duties of share ownership and to create clear policies regarding conflict of interest when investing on behalf of clients.
‘While the primary responsibility for a company’s success rests with the its board, investors in a company also play a significant role by holding the board to account for the fulfillment of its responsibilities,’ says Ashley Alder, CEO of the SFC, in a press release. ‘Recognizing the importance of responsible ownership benefits the company, its investors and the economy as a whole.’
