Equiniti ezine | January 2012

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The latest news from Equiniti and the wider group


<ul><li><p>&gt; JANUARY 2012</p><p>INSIDE THIS ISSUE:</p><p>WEBCASTEddie Gray shares some recent examples of successful Employee Share Plan launches</p><p>A BIG YEAR FOR COMPANY SECRETARIESKey developments to watch out for in 2012</p><p>WHAT'S HAPPENING IN EUROPE?The ripple effect of proposed changes to corporate governance</p><p>THE COMPELLING CASE FOR SHARE PLANSRenewed political support for employee share plans</p><p>WHAT WILL THE OLYMPICS LEAVE US WITH?Economy legacy of London 2012</p><p>NO CAUSE FOR COMPLAINTAdvice on new complaint-handling procedures</p><p>EZINE</p><p>3</p></li><li><p>WEBCAST</p><p>EZINE &gt; JANUARY 2012 PAGE 2/14</p><p>Eddie Gray, Head of Service Delivery at Equiniti, shares some recent examples of successful Employee Share Plan launches</p><p>WEBCAST: SHARE PLAN LAUNCHES</p><p>LAUNCH VIDEO IN BROWSER</p><p>EXECUTIVE REMUNERATION &gt; ON PAGE 3</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EXECUTIVE REMUNERATION</p><p>EZINE &gt; JANUARY 2012 PAGE 3/14</p><p>CONTINUED ON PAGE 4</p><p>David Venus, of David Venus &amp; Company, looks at the key issues cropping up this year starting with that bone of contention otherwise known as directors remuneration</p><p>A BIG YEAR FOR COMPANY SECRETARIESTop of the list for company secretaries to look out for this year is executive remuneration. On 23 January 2012, </p><p>Vince Cable, the Business Secretary announced a raft of measures to justify the 'fat cat' salaries that many large companies are accused of paying their top executives. He said that secondary legislation will be introduced later this year to require listed companies to publish simplified remuneration reports, so that a reader can see a single figure for the value of an executives pay package, glean details of future pay policy, find out how the company has consulted employees and taken their views into account, and read how pay awards relate to the companys performance and other costs such as dividends, business investment, taxation and staff costs. </p><p>Mr Cable also announced that he will be consulting on new powers to hold listed </p><p>company boards to account. Matters to be considered will include: Giving shareholders a binding vote on </p><p>future pay policy, any directors notice period of more than one year and exit payments of more than one year. He will consider if 75% shareholder approval should be necessary rather than the 50% that now applies to the advisory vote. </p><p> Promoting more diverse boards by requiring at least two board members to be appointed who have never previously been members of a board. These might include people from the professions, public servants, academics or lawyers. </p><p> Requiring greater transparency on the role of remuneration consultants, how they are appointed, their fees and whom they advise and report to.</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EXECUTIVE REMUNERATION</p><p>EZINE &gt; JANUARY 2012 PAGE 4/14</p><p>CONTINUED ON PAGE 5</p><p> Limiting membership of executives of other companies on remuneration committees so to eliminate possible conflicts. </p><p> Introducing 'clawback' provisions to require companies to recoup bonuses from executives when they are subsequently shown to have been unwarranted. </p><p>Closely linked to executive remuneration is narrative reporting. The current Business Review and the Directors Report will be replaced with two documents a Strategic Report and an Annual Directors Statement. The Strategic Report will need to be signed off by each individual director and the company secretary. Its really pinning responsibility for strategy on each director. There will be some simplifications for unlisted companies, but for listed companies, there will be increased disclosure on gender, diversity and remuneration. The Annual Directors Statement will contain formal reports such as the existing remuneration reports, corporate governance statement and the audit committee report. </p><p>The new provisions on remuneration reports and on narrative reporting are likely </p><p>to be introduced for the accounting years beginning 1 October 2012. </p><p>Other key issues for company secretaries to keep an eye on are as follows:</p><p>Equity marketsProfessor John Kays report into equity markets will look at all aspects of the UK equity market and their impact on long-term competitive performance of UK business. Final conclusions are expected in July.</p><p>EU Prospectus DirectiveAmendments to the EU Prospectus Directive are due in July. These will include a list of matters that EU companies will have to disclose in their base prospectus.</p><p>EU Transparency Directive proposalsThe key aim here is to replace quarterly reporting for quoted companies with half-yearly reporting. There will be new provisions on notification of interests on shares and greater penalties for non-disclosure.</p><p>Mandatory audit company rotationThe EU is proposing that listed and financial </p><p>services companies will have to change their audit firm every six years. Large audit firms may also be banned from doing non-audit work for the same company. Naturally, the audit firms are unimpressed about all this!</p><p>Foreign Account Tax Compliance ActThis US legislation requires foreign financial institutions to report all US nationals who invest with them to the IRS. The National Association of Pension Funds believes this is unworkable and is seeking a full exemption for UK financial institutions.</p><p>Vickers Report A White Paper on the Independent Banking Commissions Report is expected in the spring, setting out the Governments plan for implementation.</p><p>Retail investment products There is an EU proposal to ensure consistent and effective standards for packaged retail investment products such as annuities and life insurance policies. Part of the aim is to rein in sales malpractices. </p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EXECUTIVE REMUNERATION</p><p>EZINE &gt; JANUARY 2012 PAGE 5/14</p><p>EUROPEAN REFORM &gt; ON PAGE 6</p><p>Competition and Markets AuthorityTwo UK agencies the Office of Fair Trading and the Competition Commission are due to merge to create a single Competition and Markets Authority. </p><p>Data protection laws EU proposals for reform of data protection laws will include increased fining powers for data protection breaches. All companies with more than 250 employees will also have to appoint a data protection officer.</p><p>Gender diversityFrom October 2012, the UK Corporate Governance Code will require companies to disclose the percentage of women in their organisation, as well as fuller reporting in their accounts of its diversity policy.</p><p>Whats an SME?Simplification of the EUs definition for small and medium sized enterprises is being brought in. This will allow more small companies to take advantage of accounting exemptions.</p><p>Striking offNew guidelines for striking off companies. Smaller companies will now have to reduce their share capital in accordance with the provisions of the Companies Act. </p><p>Dividends The European Securities and Markets Authority announced new guidance on dividend policy. It makes clear that company pronouncements on dividend policy may constitute inside information. Care should be taken by listed companies when making statements on future dividend policy.</p><p>IF YOU WOULD LIKE MORE INFORMATION:For more information please contact david.venus@</p><p>davidvenus.com</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EUROPEAN REFORM</p><p>EZINE &gt; JANUARY 2012 PAGE 6/14</p><p>CONTINUED ON PAGE 7</p><p>Peter Swabey discusses the ripple effect of proposed changes to corporate governance practices in Europe</p><p>WHATS HAPPENING IN EUROPE?The year ahead is one of extensive change in legislation, regulation and corporate governance. Among the </p><p>most contentious of the changes is the proposed regulation and directive on audit reform, which were published by the European Commission in November and can be found at: http://ec.europa.eu/internal_market/auditing/docs/reform/regulation_en.pdf http://ec.europa.eu/internal_market/auditing/docs/reform/directive_en.pdf.</p><p>Proposals include a ban on the auditors of listed companies providing non-audit services, and the mandatory rotation of audit firms. The Commission has always been nervous about the practice of the former after all, if the business pays higher fees for other services, the auditor might well be tempted to look the other way. </p><p>This year will also see an even greater drive to harmonise share transactions across </p><p>Europe. In the UK, a share transaction is considered effective only when it is settled in our security system, CREST. However, practices diverge greatly in different European countries where, for example, ownership can change when the transaction is agreed. In practice, this creates a system where if a shareholder is buying UK shares from a broker in another member state, there could be a period of time where both buyer and seller believe that they own those shares. It hardly </p><p>needs saying that this can cause a problem if a liability or shareholder benefit crops up. We saw evidence of this when Lehmans went bust, and it has been claimed that many shareholders believed they owned more shares than were actually held on their behalf. The directive on Securities Law sometimes called the Post-Lehmans Directive seeks to address this inconsistency but could spell major (and unnecessary) changes for the UK market. </p><p>Another initiative intended to reduce counterparty risk is the move towards T+2 settlement across Europe. Currently the UK, and most other member state markets, operate on a T+3 model, meaning that market participants have three days to settle the transaction from the date of the deal. Since transactions are not considered complete until they are settled in CREST, there is little risk associated with this practice in the UK. However, the Commission believes there is a material settlement risk in other territories, so </p><p>If a shareholder is buying UK shares from a broker </p><p>in another member state, there could be a period of time where both buyer and seller believe that they own those shares</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EUROPEAN REFORM</p><p>EZINE &gt; JANUARY 2012 PAGE 7/14</p><p>EMPLOYEE SHARE PLANS &gt; ON PAGE 8</p><p>it wants to speed things up by moving to the German model of T+2.</p><p>This can easily be achieved, but only at the cost of changing market structure, and the question has to be asked whether the benefit of harmonisation justifies the cost of this change. In my view, many of the challenges associated with pan-European trading and settlement are directly derived from a desire to shoe-horn a wide variety of market structures into a single one-size-fits-all model. There are significant differences between market structures for example in the UK we are unusual in having large numbers of certificated retail investors with a direct relationship with the issuer. However, these certificated retail investors typically trade on a T+10 basis to allow time for them to receive a stock transfer form and return it, with their share certificate, to their broker.</p><p>One way in which this change could be facilitated would be to get rid of share certificates, and the Commission are working on legislation to regulate Central Securities Depositories (i.e. CREST in the UK), early drafts of which have proposed mandating dematerialisation across Europe. </p><p>We also expect to see the implementation </p><p>of changes to the Markets in Financial Instruments Directive (MiFID) and the Market Abuse Directive (MAD), and a communication on corporate social responsibility. Finally, but by no means least, we expect to see a Green Paper on corporate governance and a consultation on company law in the early part of 2012. It is likely that these will address some of the issues around narrative reporting and executive remuneration that are currently exercising the UK Government and which are expected to impact UK reporting from financial years beginning on or after October 2012. </p><p>Its safe to say that 2012 will be a busy year for company secretaries, as we keep pace with a landscape thats constantly changing, in an attempt to minimise risk and harmonise practices across Europe.</p><p>IF YOU WOULD LIKE MORE INFORMATION:If you would like more information regarding the </p><p>issue raised in this article, please contact your Relationship Manager or Peter.Swabey@equiniti.com</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EMPLOYEE SHARE PLANS</p><p>EZINE &gt; JANUARY 2012 PAGE 8/14</p><p>CONTINUED ON PAGE 9</p><p>Phil Ainsley, Director of Employee Share Plans &amp; Benefits, highlights renewed political support for share plans and the benefits of the Employee Share Plan portal</p><p>THE COMPELLING CASE FOR SHARE PLANSNick Clegg has recently been flying the flag for employees to be offered a stake in the company they work for to </p><p>improve productivity and unlock growth. At a time when the press continue </p><p>to highlight the boardroom excesses of capitalism, he believes our problem is (not) too much capitalism - we think its that too few people have capital. His focus on wider share participation urges more companies to offer shares to their employees and considers introducing a right for workers to do so. </p><p>Our clients already recognise the value that share plans bring to their organisation and our role is to make the whole process from start to finish as simple, engaging and hassle free as possible for both corporate and participant. Key for us this year is continuing our work on expanding the ESP (Employee Share Plan) portal. This is ground-breaking technology a place where employees can </p><p>access their share plans using a single log-on, make enquiries and carry out transactions. Sharesave, SIP &amp; Executive plans; everything is in one place for them. It has been incredibly well received and the continuing rollout will be </p><p>a key priority over the next six months. A big part of the project concerns the </p><p>series of functionality releases that we are making available. The latest one provides online real-time sales for the share incentive plan. Were also looking to develop online dealing at maturity for Sharesave. </p><p>Client involvement and feedback is very important to the way that we have developed the portal. Were constantly looking for new ways to develop the service and have created a client focus group that refines what we deliver and prioritises the releases. </p><p>We already have ten clients using the portal, but were steadily making it available across the rest of our client base as well. There are two clients using it to full capacity at the moment: BT and, most recently, BSkyB. They use what we call federation where people log on at work to their normal secure intranet but can gain immediate access to the secure </p><p>Nick Clegg is urging more companies to offer shares to their employees</p></li><li><p>CLICK HERE TO READ THIS STORY ON THE EQUINITI WEBSITE</p><p>EMPLOYEE SHARE PLANS</p><p>EZINE &gt; JANUARY 2012 PAGE 9/14</p><p>BEYOND THE OLYMPICS &gt; ON PAGE 10</p><p>Equiniti ESP portal without any further ID. This makes it so easy to use and many participants dont even realise that theyre moving out of their corporate environment and into ours because their own branding, look and feel is carried across into our world adding value to the companys total reward p...</p></li></ul>