Q&A document related to the Code of good practice for investors

The CNMV has issued a Q&A document in relation to the Code of good practice for investors, a voluntary framework for institutional investors, asset managers, and proxy advisors. The Q&A document addresses consultations from the industry and provides insights into the interpretation of the Code’s principles.
The Code is voluntary, aiming to enhance corporate governance and investment practices, the Q&A document consists of 15 questions, covering general aspects and the seven principles of the Code.
– General Questions: The Code does not allow partial adoption, and all assets and activities must comply fully. Entities adopting a transitional period must publicly commit to implementing principles within three years.
– Long-Term Strategy (Principle 1): Short-term investment policies are compatible with the Code, emphasizing the principle of proportionality.
– Knowledge and Monitoring of Companies (Principle 2): Proportionality allows adjusting the depth of knowledge based on the relevance of companies to the affiliated entity’s strategy.
– Development and Publication of the Engagement Policy (Principle 3): Engagement can take various forms, and bilateral dialogue is not mandatory but should be considered when appropriate. Engagement policies should be clear, precise, and include measurable criteria, reflecting a joint approach to the total investment.
– Exercise of the Voting Right (Principle 4): Voting policies should be clearly defined, providing guidelines and criteria for exercising voting rights.
– Transparency of Engagement and Voting Actions (Principle 5): Annual reports on actions should be published within 12 months after the end of each financial year. Reports should contain examples and specific actions to help stakeholders understand monitoring, engagement, and voting activities.
– Governance and Transparency (Principle 6): Entities determine vote significance internally, distinguishing report-worthy votes from those needing qualitative explanations. Conflicts of interest examples can be disclosed without specific company identification.
– Remuneration Alignment (Principle 7): Specify variable remuneration linked to objectives, aligning with business strategy. The principle applies to individuals managing corporate-level activities independently and with full responsibility.
– Frequency of Review of the Engagement Policy: Entities determine the frequency of review based on their policy, characteristics, and nature. Reviews may be necessary in the case of major corporate changes.