The obligation to secure your opponent's data in the age of hacking
Hacking, corporate espionage and data breaches are on the rise around the globe.
On February 11, 2019 the Department for Work & Pensions published the Government’s response to its summer 2018 consultation document, “Protecting Defined Benefit Pension Schemes – A Stronger Pensions Regulator. That consultation document set out a number of proposals to improve the powers of the Pensions Regulator (TPR).
The key proposals to be taken forward are as follows:
Notifiable events framework
The government proposes to take forward the introduction of the following new employer-related notifiable events:
The government accepts that the definition of the terms relating to each of these new events will be crucial and it will, with TPR, engage with stakeholders to develop its thinking further.
The government will remove the existing notifiable event of “wrongful trading of the sponsoring employer” but, in light of comments received, it does not intend to take forward its original proposals for the following to be additional new notifiable events:
The government is also not proposing to extend the framework to cover the payment of dividends but TPR will consider, when reviewing a scheme’s funding valuations, whether the level of dividend payment made by a sponsoring employer or its parent company is appropriate in relation to the scheme’s funding position or where a recovery plan has been agreed. In addition, the DWP is to continue to work with the Department for Business, Energy and Industrial Strategy in relation to strengthening the UK’s framework relating to dividend payments.
Proposal to bring forward or specify more clearly timing of reporting notification of certain events
The government had proposed bringing forward the reporting notification of certain events to, for example, the point at which heads of terms are agreed for some transactions. In light of comments received, the government states that it recognises that there is more work to be done in this area and it will work with TPR and industry to identify where earlier notification could be beneficial in relation to each of the employer-related notification events and how best to make this clear, whether in legislation or a revised Notifiable Events Code of Practice.
Declaration of intent
The consultation document proposed the introduction of a Declaration of Intent made by the corporate transaction planner which would include an explanation of the transaction, confirmation that the trustee board has been consulted and how any detriment to the scheme is to be mitigated.
The government notes that opinion was divided on the introduction of a Declaration of Intent but it does believe that a statement from the transaction’s corporate planners (including but not restricted to the sponsoring employer or parent company) will help trustees to understand the detailed nature and implications of a proposed transaction for the scheme. As a result, it intends to legislate for the introduction of a Declaration of Intent that will be shared with the trustee board of the pension scheme and TPR. It will also consider in more detail, together with the industry, the content of the Declaration of Intent and the supporting guidance in the Notifiable Events Code of Practice.
In terms of timing of engagement with trustees and the issuing of a Declaration of Intent by sponsoring employers, the government will work with TPR to identify a flexible approach that takes into account the particular circumstances of individual transactions. It is not currently intending to legislate to specify when the Declaration of Intent should be shared with the pension scheme trustees and TPR but expectations on timing will be set out in the guidance in the Notifiable Events Code of Practice.
Improved powers of a TPR
The consultation paper sought views on proposals to introduce a new civil penalty of up to a maximum of £1m for serious breaches and three new criminal offences to punish wilful or reckless behaviour in relation to a defined benefit pension scheme, non-compliance with a Contribution Notice and failure to comply with the notifiable events framework.
The government intends to move forward with these measures. It sets out the range of new and existing offences which the new civil penalty of up to a maximum of £1m will apply in a table in the response document. The government is to move forward with the proposals for new criminal offences for wilful or reckless behaviour in relation to a pension scheme and for failure to comply with a Contribution Notice, but the penalty for failure to comply with the notifiable events framework will be the new civil penalty of up to £1m.
The government’s proposal is for a maximum penalty of up to seven years imprisonment and/or unlimited fines for wilful or reckless behaviour in relation to a pension scheme and failure to comply with the Contribution Notice criminal offence will attract a maximum penalty of unlimited fines.
Contribution notices and financial support directions
The government is proposing to proceed with the proposals it set out in the consultation document to strengthen, clarify and improve TPR’s powers in relation to Contribution Notices although it will amend the reasonableness test to reflect that the actual or potential impact of the act, or failure to act, on the value of the scheme’s assets or liabilities, would be a relevant consideration when determining the amount to be paid under a Contribution Notice. It will also add two additional limbs to the material detriment test to clarify the legislation and intends to proceed with its proposals for a more streamlined Financial Support Direction regime.
On February 14, 2019 the Department for Business, Energy & Industrial Strategy (BEIS) published the terms of reference for the independent review into the quality and effectiveness of audit being led by Sir Donald Brydon. The review will engage with a wide range of stakeholder groups in order to fully understand the range of issues facing audit, and ensure constructive challenge.
The review has been commissioned in response to the perceived widening of the “audit expectations gap” - the difference between what users expect from an audit and the reality of what an audit is and what auditors’ responsibilities entail. The review is intended to reconsider the scope of the audit, how far it can and should evolve to meet the needs of users of accounts, what other forms of assurance might need to be developed, and to define and manage any residual expectations gap. The review will also consider how the audit product should be developed to serve the public interest in future, taking account of changing business models, new technology and stronger public expectations.
The terms of reference establish the review’s scope including
On February 19, 2019 the Investment Association published guidelines on the redemption or cancellation of irredeemable preference shares. The guidelines are intended to act as a useful guide to shareholder expectations and good practice and to be of general application to listed companies.
The guidelines, amongst other things, provide that
On February 21, 2019 the Investment Association announced that it will highlight companies who are lagging behind on diversity or pay contributions to executive directors at rates above the majority of the workforce at 2019 AGMs.
Its Institutional Voting Information Service (IVIS) will “red top” companies that have no or only one woman on the board and “amber top” companies not on course to meet the 33 per cent women on board target by 2020 recommended by the Hampton-Alexander Review. IVIS will also highlight any board with women representing 25 per cent or less.
In addition, IVIS will “red top” any companies paying newly appointed directors pension contributions which are not in line with the majority of their employees. This is an expectation set in the Investment Association’s Principles of Remuneration published in November 2018.
On February 21, 2019 the European Commission published a consultation paper which supplements its June 2017 non-binding guidelines on non-financial reporting, specifically with regard to the reporting of climate-related information.
The supplement on climate-related reporting is also non-binding and companies can choose alternative approaches to the reporting of climate-related information. Companies are advised to consider using the proposed disclosures in the supplement if either climate-related information is necessary for an understanding of the company’s development, performance and position or if it is necessary for an understanding of the external impacts of the company.
The supplement proposes climate-related disclosures in relation to the business model, policies and due diligence, outcome of policies, risks and risk management and key performance indicators (being the five reporting areas in the Non-Financial Reporting Directive) and suggests that most companies under the scope of that Directive are likely to conclude that climate is a material issue. Those companies that conclude climate is not a material issue are advised to consider making a statement to that effect, explaining how that conclusion has been reached. A number of sector-specific disclosures for banks and insurance companies are proposed in Annex 1.
Comments are requested by March 20, 2019 and the European Commission intends to publish the new supplement in June 2019.
On February 8, 2019 the European Securities and Markets Authority (ESMA) published a document containing a table of the national thresholds below which an offer of securities to the public does not need a prospectus in the various member states of the EU. The aim of the list is to create transparency around the regimes adopted across the EU in light of the provisions in the Prospectus Regulation (2017/1129).
The table sets out, for each member state:
ESMA will update and republish the table on its website when it receives notifications from member states that information reflected in the document has changed. If any discrepancy is identified between the information in the table and legislation or rules published nationally, priority should be given to the latter.
On February 14, 2019 Companies House published guidance on changes to company registrations if the UK leaves the EU without a deal.
It includes guidance on the following:
Companies House proposes that if the UK leaves the EU with no deal, these changes will come into effect at 11pm on March 29, 2019. Companies House has also provided guidance on its proposed changes to related forms.
Hacking, corporate espionage and data breaches are on the rise around the globe.
Implications for cryptocurrency trading, smart contracts and AI
Decree No. 228 of 2019 (Decree 228/2019) came into effect on 27 August 2019, which simplifies and revokes previous decrees of the Ministry of Employment (MoE) to widen the type of job titles allowed for foreign professionals to work in Indonesia.