Commission Directive 2007/14/ECShow full title

Article 10 U.K. Conditions of independence to be complied with by management companies and investment firms involved in individual portfolio management(Article 12(4), first subparagraph, and Article 12(5), first subparagraph, of Directive 2004/109/EC)

1. For the purposes of the exemption to the aggregation of holdings provided for in the first subparagraphs of Article 12(4) and (5) of Directive 2004/109/EC, a parent undertaking of a management company or of an investment firm shall comply with the following conditions:

(a) it must not interfere by giving direct or indirect instructions or in any other way in the exercise of the voting rights held by that management company or investment firm;

(b) that management company or investment firm must be free to exercise, independently of the parent undertaking, the voting rights attached to the assets it manages.

2. A parent undertaking which wishes to make use of the exemption shall, without delay, notify the following to the competent authority of the home Member State of issuers whose voting rights are attached to holdings managed by the management companies or investment firms:

(a) a list of the names of those management companies and investment firms, indicating the competent authorities that supervise them or that no competent authority supervises them, but with no reference to the issuers concerned;

(b) a statement that, in the case of each such management company or investment firm, the parent undertaking complies with the conditions laid down in paragraph 1.

The parent undertaking shall update the list referred to in point (a) on an ongoing basis.

3. Where the parent undertaking intends to benefit from the exemptions only in relation to the financial instruments referred to in Article 13 of Directive 2004/109/EC, it shall notify to the competent authority of the home Member State of the issuer only the list referred to in point (a) of paragraph 2.

4. Without prejudice to the application of Article 24 of Directive 2004/109/EC, a parent undertaking of a management company or of an investment firm shall be able to demonstrate to the competent authority of the home Member State of the issuer on request that:

(a) the organisational structures of the parent undertaking and the management company or investment firm are such that the voting rights are exercised independently of the parent undertaking;

(b) the persons who decide how the voting rights are to be exercised act independently;

(c) if the parent undertaking is a client of its management company or investment firm or has holding in the assets managed by the management company or investment firm, there is a clear written mandate for an arms-length customer relationship between the parent undertaking and the management company or investment firm.

The requirement in point (a) shall imply as a minimum that the parent undertaking and the management company or investment firm must established written policies and procedures reasonably designed to prevent the distribution of information between the parent undertaking and the management company or investment firm in relation to the exercise of voting rights.

5. For the purposes of point (a) of paragraph 1, ‘direct instruction’ means any instruction given by the parent undertaking, or another controlled undertaking of the parent undertaking, specifying how the voting rights are to be exercised by the management company or investment firm in particular cases.

‘Indirect instruction’ means any general or particular instruction, regardless of the form, given by the parent undertaking, or another controlled undertaking of the parent undertaking, that limits the discretion of the management company or investment firm in relation to the exercise of the voting rights in order to serve specific business interests of the parent undertaking or another controlled undertaking of the parent undertaking.