ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Monday launched Stewardship Framework for institutional investors to promote long-term value creation and “responsible” engagement of institutional investors with the investee companies.
SECP officials informed media at the SECP headquarters on Monday that the Stewardship Framework would be applicable to the Asset Management Companies, Pension Fund Managers, Private Fund Management Companies, Life Insurers and Employees Contributory Funds managed by the Investment Advisors with equity holding in listed companies.
The Stewardship Guidelines have been issued under section 40B of the SECP Act, 1997 comprise a set of best stewardship principles, and intend to guide institutional investors on effective exercise of their stewardship responsibilities with due regard both to their investors and investee companies.
The Stewardship framework, adopted on ‘comply or explain’ basis, emphasizes that institutional investors are responsible to their ultimate long-term investors and beneficiaries, and that their policies on voting, monitoring and engagement, conflict of interest and sustainability consideration should be designed to protect the interests of these long-term clients and beneficiaries. It further provides guidance on how to implement each principle and outcome that is expected from applying the principle.
Comprising a set of best stewardship principles, the guidelines provide a comprehensive stewardship framework to steer institutional investors on effective exercise of their stewardship responsibilities with due regard both to their investors and investee companies.
The institutional investors shall compile a report (the “Report”) on how they have fulfilled their stewardship responsibilities as per their policy in an easy understandable format and shall upload this Report on its website on annual basis.
SECP contemplates conducting orientation sessions in collaboration with key stakeholders for raising awareness on Stewardship Principles within the institutional investors’ community and also a post regulatory impact analysis in future to assess implementation of Stewardship Guidelines.
Officials explained that the Institutional Investors shall have comprehensive stewardship policy covering all principles on how they intend to fulfil their stewardship role and disclose such policy on its website. Institutional Investor shall review and regularly update their policy to ensure that their stewardship policy enable effective stewardship and shall explain how their review has led to improvement of the stewardship policy taking due cognisance of the impact of their policy on the larger economic, social and environment concerns of the country.
Under the new framework, the institutional investors shall carefully record and analyse voting rights exercised in accordance with its relevant policies, so as to facilitate disclosure of the voting activities. For instance, votes cast in favour, against or abstaining from various types of motions made by investee companies. Institutional Investors shall disclose in the Report a summary of their voting activities including proxy voting as it gives the investor greater clarity on how the votes are cast.
These institutional investors shall formulate a policy on monitoring the investee company especially specifying the instances where they want to be involved with the investee company and instances which need to be disclosed in the Report.
They also should have clear policy about their investee companies’ adherence to Listed Companies (Code of Corporate Governance) Regulations and how they will engage with their investee companies if they have concerns.
The institutional investors shall integrate their policy with corporate governance and sustainability considerations including environmental, social and governance (ESG) factors to deliver sustainable returns in the long-term interest of investor, SECP officials added.
Copyright Business Recorder, 2022
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