TMI BlogStewardship Code for all Mutual Funds and all categories of AIFs, in relation to their investment in listed equitiesX X X X Extracts X X X X X X X X Extracts X X X X ..... esponsibility towards their clients / beneficiaries by enhancing monitoring and engagement with their investee companies. Such activities are commonly referred to as Stewardship Responsibilities of the institutional investors and are intended to protect their clients' wealth. Such increased engagement is also seen as an important step towards improved corporate governance in the investee companies and gives a greater fillip to the protection of the interest of investors in such companies. 2. SEBI has already implemented principles on voting for Mutual Funds through Circulars dated March 15, 2010 and March 24, 2014, which prescribed detailed mandatory requirements for Mutual Funds in India to disclose their voting policies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Stewardship Code Principle 1 Institutional Investors should formulate a comprehensive policy on the discharge of their stewardship responsibilities, publicly disclose it, review and update it periodically. Guidance Stewardship responsibilities include monitoring and actively engaging with investee companies on various matters including performance (operational, financial, etc.), strategy, corporate governance (including board structure, remuneration, etc.), material environmental, social, and governance (ESG) opportunities or risks, capital structure, etc. Such engagement may be through detailed discussions with management, interaction with investee company board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns where conflict of interest may arise. E.g. in case of investee companies being associates of the entity. 2. Procedures put in place by the entity in case such conflict of interest situations arise which may, inter alia, include: a. Blanket bans on investments in certain cases b. Having a Conflict of Interest Committee to which such matters may be referred to. c. Clear segregation of voting function and client relations/ sales functions. d. Policy for persons to recuse from decision making in case of the person having any actual/ potential conflict of interest in the transaction. e. Maintenance of records of minutes of decisions taken to address such conflicts. 3. Periodical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial etc. b. Industry-level monitoring and possible impact on the investee companies. c. Quality of company management, board, leadership etc. d. Corporate governance including remuneration, structure of the board (including board diversity, independent directors etc.) related party transactions, etc. e. Risks, including Environmental, Social and Governance (ESG) risks f. Shareholder rights, their grievances etc. 3. Identification of situations which may trigger communication of insider information and the procedures adopted to ensure insider trading regulations are complied with in such cases. Principle 4 Institutional investors should have a clear policy on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific cases. Principle 5 Institutional investors should have a clear policy on voting and disclosure of voting activity. Guidance To protect and enhance wealth of the clients/ beneficiaries and to improve governance of the investee companies, it is critical that the institutional investors take their own voting decisions in the investee company after in-depth analysis rather than blindly supporting the management decisions. This requires a comprehensive voting policy to be framed by the institutional investors including details of mechanisms of voting, circumstances in which voting should be for/against/abstain, disclosure of voting, etc. The voting policy, voting decisions (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs should report periodically on their stewardship activities. Guidance Institutional investors shall report to their clients/ beneficiaries periodically on how they have fulfilled their stewardship responsibilities as per their policy in an easy-to-understand format. However, it may be noted that the compliance with the aforesaid principles does not constitute an invitation to manage the affairs of a company or preclude a decision of the institutional investor to sell a holding when it is in the best interest of clients or beneficiaries. Institutional investors shall report periodically on their stewardship activities in the following manner: 1. A report may be placed on website on implement ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
