Ashurst Governance & Compliance Update – Issue 67

Stewardship

1. FRC publishes revised UK Stewardship Code 2026

The Financial Reporting Council has published the UK Stewardship Code 2026 together with a feedback statement to the consultation it launched in November 2024.

For background on the consultation and the Stewardship Code itself, including the way in which the Code works, see AGC Update, Issue 59 – Item 2. For a reminder of the interim changes to the 2020 Stewardship Code introduced in July 2024, see AGC Update, Issue 55 – Item 8.

Key differences between the 2026 Stewardship Code and the 2020 iteration include:

• An enhanced definition of stewardship: Stewardship is defined as "the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries". Supporting language to the definition has been revised to incorporate elements of section 172 of the Companies Act 2006 as regards various stakeholder interests.
• Reduced reporting burden: The 2026 Code features fewer Principles and shorter 'how to report' prompts instead of detailed reporting expectations, seeking to eliminate 'box-ticking' approaches to reporting against the Principles. The FRC suggests that, based on the interim changes already implemented, signatories may be able to reduce reporting volume by 20-30% while maintaining quality.
• Flexible reporting structure: Signatories can submit separate Policy and Context Disclosures and Activities and Outcomes Reports or combine them into a single document. The Policy and Context Disclosure will only need to be submitted once every four years.
• Targeted Principles: The 2026 Code includes dedicated Principles for different types of signatories, including asset owners, asset managers and, for the first time, specific Principles for proxy advisors, investment consultants, and engagement service providers.
• New guidance: Optional guidance provides tips and examples to support implementation, particularly for those managing non-equity asset classes.

The revised Code applies from 1 January 2026. To support signatories in adapting to the new Code, 2026 will serve as a transition year during which no existing signatories will be removed from the signatory list following their 2026 application.

Regulation in Practice

2. FCA finalises controversial enforcement policy

The FCA has published its long-awaited policy statement on market enforcement. By way of reminder, the broad aim of the policy is to help the FCA complete investigations in a shorter time period whilst increasing transparency.

The policy follows on from CP24/2 and CP24/2: Part 2 which set out, amongst other things, the FCA's controversial "naming and shaming" proposals (which were subsequently dropped in March 2025).

Key takeaways from the policy statement are:

Publicity during FCA Investigations

The FCA's original consultation set out its plans to name firms under investigation on the basis that it would be in the public interest to do so. Following extensive feedback from various market participants, the proposal was dropped and instead the FCA have settled with their existing "exceptional circumstances" policy in relation to naming firms under investigation with three caveats. As such, the FCA can:

1. Announce investigations into firms where there has been suspected unauthorised activity or criminal offences related to unregulated activity.
2. Announce investigations into a particular matter on an anonymised basis, i.e. without naming or identifying the subject of the investigation.
3. Confirm that it is investigating a subject if the investigation has already been made public by the firm under investigation, an affiliated company or regulatory body, government or public body in the UK or a partner jurisdiction.

In respect of the second item above, the FCA stated that there was broad support for increased transparency through anonymised announcements (neither naming nor identifying the subject of the investigation) where it would be helpful to educate people on the types of misconduct the FCA is investigating in general terms. We expect this may be a precursor to the introduction of an 'Enforcement Watch' type publication.

The revised Enforcement Guide

The policy statement also sets out the FCA's changes to its Enforcement Guide. Whilst many of these changes look to make the document more user-friendly, some changes are more substantive. Key amendments include:

• Attendance of legal advisers at interviews: The new Enforcement Guide suggests that the FCA may refuse to allow legal advisers to attend compelled interviews where it feels that it could prejudice an investigation (e.g., due to conflicts of interest where the same legal adviser is representing two or more individuals as part of the same investigation).
  
  In reality, the practical impact of the proposal is likely to be small given that: (a) solicitors have their own professional duties to adhere to including as regards conflicts, and (b) given the FCA’s new investigative approach of only carrying out interviews if absolutely necessary, many investigations will not be impacted in any event.
• Scoping meetings: The FCA has moved from a starting presumption that there will always be a scoping meeting to, instead, deciding whether one is necessary on a case-by-case basis. Nevertheless, the FCA will generally hold such a meeting if requested to do so by the subject of the investigation.
  
  Whilst this more flexible approach is to be welcomed, we suspect that most investigations will still involve a scoping meeting, not least because it is of benefit to the subject of the investigation to meet with the case team so as to glean as much information as early as possible.
• Private warnings: The FCA has removed reference to private warnings as an enforcement tool in the Enforcement Guide. Whilst this is a material drafting change, in practice this merely formalises the approach of the FCA in the past few years.

Remuneration Reporting

3. GC100 and Investor Group publishes updated Directors' Remuneration Reporting Guidance

The GC100 and Investor Group has published an updated version of its Directors' Remuneration Reporting Guidance, revised to reflect evolving best practice and changes introduced by the Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025. For more detail on the Regulations, see AGC Update, Issue 63 – Item 4 and AGC Update, Issue 65 – Item 5 for an overview of the guidance published by the Department of Business & Trade.

By way of reminder, the GC100 guidance aims to help companies satisfy the requirements of the directors' remuneration reporting regime, in some cases recommending disclosures that go beyond statutory requirements but are considered helpful in ensuring investors can make informed voting decisions.

In addition to reflecting the regulations, changes to the GC100 guidance seek to clarify the overlapping requirements of the UK Corporate Governance Code on significant votes against any resolution, employee consultations and workforce pay and conditions.

Key changes include new guidance on:

• Engagement with shareholders and consideration of shareholders' views.
• ESG measures in variable pay.
• Consideration of general workforce pay.
• Potential windfall gains from long-term incentive awards.

While on the subject of remuneration, following consultation, Ofwat has published its final rule on water company directors' performance related pay introduced under the Water (Special Measures) Act 2025. The new rule is effective immediately and applies to any performance related pay paid or due to be paid by in-scope water companies in relation to any year commencing on or after 1 April 2024. Ofwat has also published non-mandatory guidance.

Economic Crime and Corporate Transparency

4. Implementation of ECCTA – latest developments

Annotating the register of overseas entities

Earlier this month, we reported on new regulations giving the Registrar of Companies powers to annotate the public register of companies (see AGC 66, Issue 66 – Item 1) in order to improve the accuracy and transparency of information held at Companies House, a key objective of the Economic Crime and Corporate Transparency Act 2023.

The government has now published the Register of Overseas Entities (Annotation) Regulations 2025 and an Explanatory Memorandum (both accessible by clicking here).

The Regulations give the Registrar additional powers to annotate the Register of Overseas Entities (ROE), which was introduced in August 2022 to enhance the transparency of beneficial owners of overseas entities holding land in the UK.

With effect from 30 June 2025, the Regulations allow the Registrar to annotate the ROE in certain circumstances such as where an overseas entity has ceased to exist in its home jurisdiction or where it has failed to comply within time to a written notice from the Registrar requiring it to provide particular information.

ECCTA and its impact on the corporate crime landscape

For our latest Governance & Compliance podcast which focuses on the fast moving corporate crime landscape, including the ECCTA-driven offence of failure to prevent fraud, click here.

Equity Capital Markets

5. FCA publishes final rules for new PISCES secondary market

The Financial Conduct Authority has published Policy Statement 25/6: Private Intermittent Securities and Capital Exchange System – sandbox arrangements in which it sets out its final Private Intermittent Securities and Capital Exchange System (PISCES) sandbox rules for platform operators (more detail can be found in our update here).

The FCA's rules, together with the PISCES Sandbox Regulations which were published in May 2025 (see AGC Update, Issue 66 – Item 9), will set the regulatory requirements for PISCES - a new type of platform where shares in private companies can be traded on an intermittent basis. In addition, the Private Intermittent Securities and Capital Exchange System (Exemption from Stamp Duties) Regulations 2025, which exempt PISCES transactions from stamp duty and stamp duty reserve tax, have now also been laid before Parliament.

Notably, the London Stock Exchange has announced that it will be applying to the FCA to operate in the PISCES sandbox though its Private Securities Market.