Page 23 - Dittmar Quarterly Q1 2019

4.
Transparency requirements for institutional investors, asset managers and proxy advisors
Institutional investors and asset managers will proxy advisors respectively must publicly disclose be required to develop and publicly disclose an the above-mentioned documents free of charge on engagement policy that describes how they integrate their websites and update them annually. Non- shareholder engagement with their investment compliance with one or more of the requirements is strategy. In practice, the requirement will apply to permitted only for good cause and the reasons for Finnish life insurance companies as well as most non-compliance must be publicly disclosed. If the pension and insurance funds. rules are violated, an administrative fee may apply
as a sanction.
• Monitor investee companies on relevant matters, In consideration of the proposed changes, Finnish including strategy, financial and non-financial publicly listed companies should:
performance and risk, capital structure, social and • Justify the chosen form and level of director environmental impact and corporate governance; remuneration better than earlier at AGMs
• Conduct dialogues with investee companies; held from 1 January 2020 onwards;
• Exercise voting rights and other rights • Ensure that all related party transactions are
attached to shares; always well-documented and approved in • Cooperate with other shareholders; compliance with the new decision-making • Communicate with relevant stakeholders rules; and
of the investee companies; and • Comply with disclosure requirements on director • Manage actual and potential conflicts remuneration and the temporal limitations
The engagement policy shall describe how
institutional investors and asset managers Key insights
of interests in relation to their engagement.
The activities of proxy advisors, such as ISS and Glass, Lewis & Co, will also be regulated correspondingly by the Securities Markets Act. Proxy advisors will be required to develop and publicly disclose a code of conduct. The code of conduct shall describe how proxy advisors prepare their research, advice and voting recommendations. Further, proxy advisors are required to prevent and manage any actual or potential conflicts of interests and disclose them to clients without delay. This is of large practical importance because the recommendations of proxy advisors significantly impact the decision-making of foreign shareholders, who owned approximately 43 per cent of the market capitalisation of all Finnish listed companies (12/2017).
Common denominators of the transparency requirements are public disclosure, the comply
or explain principle, and the applicable sanctions regime. Institutional investors, asset managers and
regarding the storage of information on shareholder identity.
Moreover, institutional investors, asset managers and proxy advisors operating in Finland should:
• Develop an engagement policy and/or code
of conduct; and
• Comply with related disclosure requirements.
For more information and guidance, please contact the Head of our Corporate Advisory, Compliance & CSR practice group, Hanna-Mari Manninen.
Hanna-Mari Manninen, Partner @hm_manninen
Tuomas Tiensuu, Senior Associate
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