EBA publishes standards on voting disclosures

October 22, 2021

Firms to disclose influence over companies in which they hold voting rights

Investment firms will be expected to publish more data on their voting rights and influence over companies in which they invest under new EU rules.

The European Banking Authority (EBA) has published a set of standards for investment firms to adopt to increase transparency surrounding the extent of influence over companies in which they hold voting rights.

Publication of the standards comes after the EBA received a mandate under the European Union's Investment Firms Regulation (IFR) to develop draft regulatory standards in consultation with the European Securities and Markets Authority (ESMA) on investment firm disclosures.

According to the EBA, the regulatory standards "should help stakeholders understand investment firms’ influence" as well as the impact of their policies on the governance and management of the companies in which they invest.

The move is intended to increase transparency across the investment industry. Firms will be expected to report on voting behaviour and their ratio of approved proposals, among other things.

The new rules are expected to shine a light on whether the voter is an active shareholder, and how it uses its votes.

The disclosure requirements apply to investment firms with assets above €100m. They cover shares traded on regulated markets but only apply to stakes greater than 5% of all voting rights issued by the company.

The standards also include information on the use of proxy advisory firms, following some concerns around conflicts of interest.

Asset managers must disclose the name of the firm, the nature of their arrangement with the proxy advisor, any investments associated with the firm, and the themes of votes the proxy advisor has given assistance on over the past year.

Similar reporting rules were introduced by the Securities and Exchange Commission in the US, while the Financial Conduct Authority is set to take an approach close to that of the EU for all UK regulated companies. Its proxy advice rules are expected to be less detailed.

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