Co-authored by Tim Aron.

On February 19, the European Securities and Markets Authority (ESMA) published a Feedback Statement on its March 2012 consultation on the role of the proxy advisory industry as service providers to institutional investors with holdings in European-listed companies.

ESMA concluded that there was no clear evidence of current market failures relating to the actions of proxy advisors. Accordingly, ESMA will not impose a regulatory regime on the proxy advisory industry at this time. However, ESMA advised that the proxy advisory industry develop an industry code of conduct, since there were a number of concerns identified regarding potential conflicts of interest and the independence of proxy advisors and also relating to the accuracy and reliability of the advice that they provide. In the Feedback Statement, ESMA encouraged that the general considerations and principles for the code of conduct focus on:

• identifying, disclosing and managing conflicts of interest; and

• fostering transparency to ensure the accuracy and reliability of advice.

ESMA will review the development of the industry code of conduct in February 2015 at which time it may decide to impose regulatory measures.

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