The UK's regulator is proposing new measures and gathering practitioners' views about how to encourage effective stewardship in the interests of investors. Asset managers, it claims, have a duty to oversee investments in their clients’ interests.

The FCA, in conjunction with the Financial Reporting Council (FRC), is now asking interested parties whether it can take any fresh steps to encourage asset managers to monitor the companies in which they invest closely, communicate with them actively and hold them to account. By imposing additional rules on them, it hopes to turn them into long-term, effective stewards of money.

With this in mind, it has published a consultative paper about the steps it might take to make British financial firms obey the European Union's amended Shareholder Rights Directive (SRD II) for FCA-regulated life insurers and asset managers, as well as for issuers of shares in respect of related party transactions. The directive comes into effect in June and, on the optimistic assumption that the UK can negotiate a transition period for its withdrawal from the EU, will have to be enshrined in British law. SRD II aims to promote effective stewardship and long-term investment decision-making, hence the FCA's new interest in the subject.

Together with the FRC, which already has a 'Stewardship Code,' it has also publised a discussion paper about the importance and characteristics of effective stewardship and the rules on the subject that it might impose on firms that invest on behalf of clients and beneficiaries.

The FRC wants to revise its Stewardship Code and has published a consultative paper of its own on the subject. Both regulators believe that the UK already has, in their words, a "strong reputation on stewardship internationally."

CP19/7 is of interest mainly to asset owners such as trusts and asset managers, including multi-family offices.