Updated Best Practice Principles for Providers of Shareholder Voting Research & Analysis

In July 2019, the Best Practice Principles Group published its 2019 Best Practice Principles for Providers of Shareholder Voting Research & Analysis.

The 2019 Principles have been updated to reflect the European Securities and Markets Authority (ESMA) 2015 Follow-Up Report on the Development of the Best Practice Principles for Providers of shareholder voting research and analysis, the proxy advisor requirements under the EU Shareholder Rights Amending Directive (SRD II) and the latest updated stewardship codes globally.

The three main principles, which are supplemented by additional guidance, are:

• Service quality – Services should be provided to a set standard agreed with clients and research methodologies and "house" voting policies should be publicly available.
• Conflicts of interest – Proxy advisers should have and publicly disclose their conflicts of interest policy, setting out the procedures that apply in the event of a conflict arising when providing services.
• Communications − Policies on communications with issuers, shareholder proponents and other stakeholders should also be publicly available. Clients should be informed of the nature of any dialogue with relevant parties in their research reports.

Whilst proxy advisers are not required to sign up to the Principles, SRD II introduced provisions for the regulation of proxy advisers, including requirements to disclose how they have applied a code of conduct, to disclose conflicts of interest and to publish on their websites information about the preparation of research, advice and voting recommendations. The Principles reflect these SRD II requirements.