IMA: Stewardship code must stay flexible

Regulations governing institutional investors must remain flexible, the Investment Management Association (IMA) has warned.

A range of approaches to investing should be recognised within the stewardship code, the IMA has said, with more open guidelines a particular need for monitoring and verification.

Liz Murrall, director of corporate governance and reporting at the IMA, said that its members’ holdings amount to around half of the UK equity market, and pointed out that many fulfil their corporate governance duties in different ways.

‘Our members manage holdings amounting to 43% of the UK equity market but are not the ultimate owners, they act as agents and invest money on behalf of their clients. Their aim is to achieve satisfactory returns which they can do in different ways,’ Murrall said.

‘Some follow the principles in the stewardship code and seek to effect change at investee companies, whereas others send a message to a company's management through selling the shares.’

‘It is important that different approaches to investment are recognised and that the code remains flexible. This is particularly important as regards measures for monitoring and verifying adherence,’ Murrall added.

The IMA is currently in discussions with the Financial Reporting Council (FRC) about the stewardship code.  It believes that with independent oversight its own IMA Survey could offer an effective mechanism for monitoring adherence to the rules.

As it stands, however, the Walker Review proposed that the FRC should take responsibility for the code, to compliment its exiting duties for corporate governance and and the combined code, or the UK corporate governance code as it is now known.