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Status: You are viewing the version of the handbook as on 2019-09-14.

COBS 2.2B SRD requirements

Application: Who?

COBS 2.2B.1R

1This section applies to:

  1. (1)

    a UK MiFID investment firm that provides portfolio management services to investors;

  2. (2)

    a third country investment firm that provides portfolio management services to investors;

  3. (3)

    a UK UCITS management company;

  4. (4)

    an ICVC that is a UCITS scheme without a separate management company; and

  5. (5)

    a full-scope UK AIFM.

[Note: article 2(f) of SRD]

Application: What?

COBS 2.2B.2R

This section applies to the extent that the firm is investing (or has invested) on behalf of investors in shares traded on a regulated market.

COBS 2.2B.3G

The defined term regulated market has an extended meaning for the purposes of this section. The definition includes certain markets situated outside the EEA.

Application: Where?

COBS 2.2B.4R
  1. (1)

    This section applies in relation to activities carried on by a firm from an establishment in the United Kingdom.

  2. (2)

    This section also applies in relation to activities carried on by a UK firm from an establishment in another EEA State.

Engagement policy and disclosure of information

COBS 2.2B.5R

A firm must either:

  1. (1)
    1. (a)

      develop and publicly disclose an engagement policy that meets the requirements of COBS 2.2B.6R (an “engagement policy”); and

    2. (b)

      publicly disclose on an annual basis how its engagement policy has been implemented in a way that meets the requirements of COBS 2.2B.7R; or

  2. (2)

    publicly disclose a clear and reasoned explanation of why it has chosen not to comply with any of the requirements imposed by (1).

[Note: article 3g(1) and (1)(a) of SRD]

COBS 2.2B.6R

The engagement policy must describe how the firm:

  1. (1)

    integrates shareholder engagement in its investment strategy:

  2. (2)

    monitors investee companies on relevant matters, including:

    1. (a)

      strategy;

    2. (b)

      financial and non-financial performance and risk;

    3. (c)

      capital structure; and

    4. (d)

      social and environmental impact and corporate governance;

  3. (3)

    conducts dialogues with investee companies;

  4. (4)

    exercises voting rights and other rights attached to shares;

  5. (5)

    cooperates with other shareholders;

  6. (6)

    communicates with relevant stakeholders of the investee companies; and

  7. (7)

    manages actual and potential conflicts of interests in relation to the firm’s engagement.

[Note: article 3g(1)(a) of SRD]

COBS 2.2B.7R
  1. (1)

    The annual disclosure must include a general description of voting behaviour, an explanation of the most significant votes and reporting on the use of the services of proxy advisors.

  2. (2)
    1. (a)

      Subject to (b), a firm must publicly disclose how it has cast votes in the general meetings of companies in which it holds shares.

    2. (b)

      A firm is not required to disclose votes that are insignificant due to the subject matter of the vote or the size of the holding in the company.

[Note: article 3g(1)(b) of SRD]

COBS 2.2B.8R

The applicable disclosures or information referred to in COBS 2.2B.5R to COBS 2.2B.7R must be made available free of charge on the firm’s website.

[Note: article 3g(2) of SRD]

Transparency of asset managers

COBS 2.2B.9R
  1. (1)

    This rule applies where a firm invests on behalf of an SRD institutional investor, whether on a discretionary client-by-client basis or through a collective investment undertaking.

  2. (2)

    The firm must disclose to the relevant SRD institutional investor, on an annual basis, how its investment strategy and the implementation of it:

    1. (a)

      complies with the arrangement referred to in (1); and

    2. (b)

      contributes to the medium- to long-term performance of the assets of the SRD institutional investor or of the fund.

  3. (3)

    The disclosure must include reporting on:

    1. (a)

      the key material medium- to long-term risks associated with the investments;

    2. (b)

      portfolio composition;

    3. (c)

      turnover and turnover costs;

    4. (d)

      the use of proxy advisors for the purpose of engagement activities;

    5. (e)

      the firm’s policy on securities lending and how that policy is applied to supports the firm’s engagement activities if applicable, particularly at the time of the general meeting of the investee companies;

    6. (f)

      whether and, if so, how, the firm makes investment decisions based on evaluation of medium- to long-term performance of an investee company, including non-financial performance; and

    7. (g)

      whether and, if so, which conflicts of interests have arisen in connection with engagement activities and how the firm has dealt with these conflicts.

[Note: article 3i(1) of SRD]

COBS 2.2B.10G

A firm may provide the disclosure in COBS 2.2B.9R by making the relevant information publicly available.