Shareholder Rights Directive: The Proxy Advisors Regulations 2019


On May 14, the Proxy Advisors (Shareholders’ Rights) Regulations 2019 (SI 2019/926) were published. The regulations transpose into UK law Article 3j (transparency of proxy advisors) of the Shareholder Rights Directive (as amended by the Shareholder Rights Directive II). The Regulations will enter into force on June 10.

Part 2 of the Regulations require proxy advisors to make certain disclosures concerning the conduct of their business, including the obligation to:

  • Identify and disclose any actual or potential conflicts of interests or business (regulation 5).
  • Disclose certain information on their research capabilities and how they produce their advice and voting recommendations, including the essential features of the models and methodologies applied, as well as their main sources of information (regulation 4(1)). This information must be published on the proxy advisor’s website no later than the end of its first financial year commencing after June 10, and updated annually thereafter. The information must also remain freely available on the website for three years following publication (regulations 4(3) & (4)).
  • Disclose the code of conduct which they apply, report on its application, explain any departures from the code’s recommendations and indicate any alternative measures adopted (regulation 3(1)). If no code of conduct is applied, they must explain why this is the case (regulation 3(2)). This information must be made freely available on the proxy advisor’s website no later than June 21, and updated annually thereafter (regulations 3(3) & (4)).

These requirements apply to proxy advisors providing services in relation to any company whose registered office is in the UK, Gibraltar or an EEA state and whose shares are traded on a regulated market in any of those territories, where either the proxy advisor’s registered office is in the UK or, if its registered office or head office is not in the UK, Gibraltar or an EEA state, it provides proxy advisor services through an establishment located in the UK (regulation 2(1)).

Parts 3 and 4 of the Regulations empower the FCA to enforce the proxy advisor’s disclosure obligations, including the power to sanction breaches through public censure and/or financial penalties (regulations 7 -28). The FCA is also required to maintain a public list of in-scope proxy advisors, and to establish a notification regime for managing admissions to the list (regulations 30 – 32).