A.    DIRECTORS

The Board

Main Principle

Every company should be headed by an effective board, which is  collectively responsible for the success of the company

 Compliant

Supporting Principles

The board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. The board should set the company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance. The board should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met.

 Compliant

The roles of the Commission and Chief Executive are set out in the Financial Services Commission Act 2007 (“FSCA”). The Commission also sets the budget and has responsibility for ensuring that there are adequate human resources.

All directors must take decisions objectively in the interests of the company.

Compliant

In order to demonstrate this objectively, all Commission members have completed a declaration of interests which details shareholdings, directorships and other forms of remuneration.

The list of Directorships held by each Commission Member is published on our web site.

All members are required to state when they have a conflict of interest and may not participate in nor attend any element of meetings to which the conflict relates.

As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.

They should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible.

They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, executive directors, and in succession planning.

Compliant

The Commission meets four times a year.  At each meeting the Commission scrutinises management performance including the attainment of agreed goals and objectives.

Financial performance is also reported at each meeting.  The Audit Committee reviews the adequacy of the systems of control of financial controls whilst a separate risk assessment is reviewed annually by the Commission.

By statute the power to remove the Chief Executive rests jointly with the Minister and the Commission.  The Commission is responsible for the Chief Executive’s level of remuneration and there is a Nomination Committee which looks at succession planning.

A.1.1 The board should meet sufficiently regularly to discharge its duties effectively. There should be a formal schedule of matters specifically reserved for its decision.

The annual report should include a statement of how the board operates, including a high level statement of which types of decisions are to be taken by the board and which are to be delegated to management.

Compliant

The Commission meets four times per year. There is a formal agenda which contains within it matters specifically reserved to Commission decision.

As this self assessment is published on the FSC website and the role of Commission and Chief Executive are set out in statute, there is no additional need to detail the Commission’s operations in the FSC annual report.

A.1.2 The annual report should identify the chairman, the deputy chairman (where there is one), the chief executive, the senior independent director and the chairmen and members of the nomination, audit and remuneration committees. It should also set out the number of meetings of the board and those committees and individual attendance by directors.

Compliant

The annual report makes the necessary individual identifications. The Commission’s web-site, additionally, discloses members of the Audit, Nomination and Remuneration committees. The web-site also sets out the number of meetings of the board and those committees and individual attendance by directors.

A.1.3 The chairman should hold meetings with the non-executive directors without the executives present. Led by the senior independent director, the non-executive directors should meet without the chairman present at least annually to appraise the chairman’s performance (as described in A.6.1) and on such other occasions as are deemed appropriate.

Compliant

The Chairman is non executive. 

The Chairman’s performance is appraised by the Senior Independent Director following consultation with other Board Members.

The Chairman meets with non-executive Members prior to each Board meeting.

A.1.4 Where directors have concerns which cannot be resolved about the running of the company or a proposed action, they should ensure that their concerns are recorded in the board minutes. On resignation, a non-executive director should provide a written statement to the chairman, for circulation to the board, if they have any such concerns.

Compliant

Any concerns would be recorded in the Board minutes.  Whilst there have been no resignations, a written statement would be requested in accordance with the code.

.

A.1.5 The company should arrange appropriate insurance cover in respect of legal action against its directors.

Not applicable

The FSC is covered by a statutory immunity unless it acts in bad faith.

Chairman and chief executive

Main Principle

There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision

Compliant

The roles and responsibilities of the Chairman and Chief Executive are clearly set out. 

Supporting Principle

The chairman is responsible for leadership of the board, ensuring its effectiveness on all aspects of its role and setting its agenda. The chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. The chairman should ensure effective communication with shareholders. The chairman should also facilitate the effective contribution of non-executive directors in particular and ensure constructive relations between executive and non-executive directors.

Compliant

Code Provisions

A.2.1 The roles of chairman and chief executive should not be exercised by the same individual. The division of responsibilities between the chairman and chief executive should be clearly established, set out in writing and agreed by the board.

Compliant

A2.2 The chairman should on appointment meet the independence criteria set out in A.3.1 below. A chief executive should not go on to be chairman of the same company. If exceptionally a board decides that a chief executive  should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report.

Compliant

The Chairman meets the independence criteria.

Board balance and independence

Main Principle

The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking.

Non Compliant

Seven of the eight members of the Commission are non executive and independent.  The remaining member of the Commission is the Chief Executive. Whilst this  means that the balance is weighted in favour of non executive members, this is required by statute  The Commission mitigates this non compliance through regular meetings between the non executive members and senior members of staff. Staff also regularly present papers at Commission meetings.

Supporting Principles

The board should not be so large as to be unwieldy. The board should be of sufficient size that the balance of skills and experience is appropriate for the requirements of the business and that changes to the board’s composition can be managed without undue disruption. To ensure that power and information are not concentrated in one or two individuals, there should be a strong presence on the board of both executive and non-executive directors.

The value of ensuring that committee membership is refreshed and that undue reliance is not placed on particular individuals should be taken into account in deciding chairmanship and membership of committees.

No one other than the committee chairman and members is entitled to be present at a meeting of the nomination, audit or remuneration committee, but others may attend at the invitation of the committee.

.

Mainly Compliant

The Board is of an appropriate size and is required under the FSCA to have an appropriate balance of skills and experience. However there is only one executive member. The Commission considers that given its size and the access non executive members have to senior executives this does not present a problem in practice and it therefore has no plans to recommend any changes to current legislation in this area

Compliant

Compliant

A.3.1 The board should identify in the annual report each non-executive director it considers to be independent. The board should determine whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including, if the director:

• has been an employee of the company or group within the last five years;
• has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;  
• has received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share  option or a performance-related pay scheme, or is a member of the company’s pension scheme;
• has close family ties with any of the company’s advisers, directors or senior employees;
• holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
• represents a significant shareholder; or
• has served on the board for more than nine years from the date of their first election.

Compliant

All non-executive directors are independent.

There are none that meet the criteria of the principle which are regarded as bringing independence into question.

It should be noted, however, that a number of the non-executive Commission Members are also directors or officers of regulated firms.  In order to ensure their independence their financial and other interests are declared upon appointment and individual members are excluded from any discussion or decisions on firms in which they may have an interest.  A list of such interests is published on the Commission’s web-site.

A.3.2 Except for smaller companies, at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent. A smaller company should have at least two independent non-executive directors.

Compliant

Whilst the FSC would count as a small company, we fully comply with the full requirement as 7 of the 8 members of the Commission are non-executive.

A.3.3 The board should appoint one of the independent non-executive directors to be the senior independent director. The senior independent director should be available to shareholders if they have concerns which contact through the normal channels of chairman, chief executive or finance director has failed to resolve or for which such contact is inappropriate.

(A.2.2 states that the chairman should, on appointment, meet the independence criteria set out in this provision, but thereafter the test of independence is not appropriate in relation to the chairman.)

Compliant

The FSC has appointed a non executive member as “senior independent member”

Appointments to the Board

Main Principle

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.

Appointments to the Commission are not made by the FSC. Such appointments are made the Minister with responsibility for financial services from a short list prepared by the Commission.

Supporting Principles

Appointments to the board should be made on merit and against objective criteria. Care should be taken to ensure that appointees have enough time available to devote to the job. This is particularly important in the case of chairmanships.

The board should satisfy itself that plans are in place for orderly succession for appointments to the board and to senior management, so as to maintain an appropriate balance of skills and experience within the company and on the board.

Compliant

These supporting principles are adhered to in the appointments process. Member appointments/reappointments are timed to ensure orderly succession.

A Nominations Committee has been set up, part of whose role is to ensure the Commission had the right balance of skills and experience.

A.4.1 There should be a nomination committee which should lead the process for board appointments and make recommendations to the board. A majority of members of the nomination committee should be independent non-executive directors. The chairman or an independent non-executive director should chair the committee, but the chairman should not chair the nomination committee when it is dealing with the appointment of a successor to the chairmanship. The nomination committee should make available its terms of reference, explaining its role and the authority delegated to it by the board.

Compliant

The terms of reference of the Nomination Committee are published

A.4.2 The nomination committee should evaluate the balance of skills, knowledge and experience on the board and, in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment.

Compliant

A.4.3 For the appointment of a chairman, the nomination committee should prepare a job specification, including an assessment of the time commitment expected, recognising the need for availability in the event of crises. A chairman’s other significant commitments should be disclosed to the board before appointment and included in the annual report. Changes to such commitments should be reported to the board as they arise, and  included in the next annual report..

Compliant

A.4.4 The terms and conditions of appointment of non-executive directors should be made available for inspection.

The letter of appointment   should set out the expected time commitment. Non-executive directors should undertake that they will have sufficient time to meet what is expected of them. Their other significant commitments should be disclosed to the board before appointment, with a broad indication of the time involved and the board should be informed of subsequent changes.

Compliant

A.4.5 The board should not agree to a full time executive director taking on more than one non-executive directorship in a FTSE 100 company nor the  chairmanship of such a company.

Compliant

The Contract with the Chief Executive restrict the taking on of such appointments without the approval of the Chairman.  Approval would not be given in conflict with this principle.

A.4.6 A separate section of the annual report should describe the work of the nomination committee, including the process it has used in relation to board appointments. An explanation should be given if neither an external search consultancy nor open advertising has been used in the appointment of a chairman or a non-executive director.

Not applicable yet as no appointment has been made since the Committee was established in May 2007. 

Information and professional development

Main Principle

The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.

Compliant

Members receive full updates regarding the activities of the Commission

All members now receive induction training on joining the Board and receive regular industry and regulatory update briefings to ensure that their knowledge remains current.  This is achieved via detailed industry sector briefings provided on a rolling basis at commission meetings.

Supporting Principles

The chairman is responsible for ensuring that the directors receive accurate, timely and clear information. Management has an obligation to provide such information but directors should seek clarification or amplification where necessary.

The chairman should ensure that the directors continually update their skills and the knowledge and familiarity with the company required to fulfil their role both on the board and on board committees. The company should provide the necessary resources for developing and updating its directors’ knowledge and capabilities.

Under the direction of the chairman, the company secretary’s responsibilities include ensuring good information flows within the board and its committees and between senior management and nonexecutive directors, as well as facilitating induction and assisting with professional development as required.

The company secretary should be responsible for advising the board through the chairman on all governance matters.

Compliant

The company secretary should be responsible for advising the board through the chairman on all governance matters.

Compliant

A.5.1 The chairman should ensure that new directors receive a full, formal and tailored induction on joining the board. As part of this, the company should offer to major shareholders the opportunity to meet a new non-executive director.

Compliant

The Commission has introduced formal induction training for all Commission Members including time with senior management which takes place prior to the attendance at their first meeting.

A.5.2 The board should ensure that directors, especially non-executive directors, have access to independent professional advice at the company’s expense where they judge it necessary to discharge their responsibilities as directors. Committees should be provided with sufficient resources to undertake their duties.

Compliant

A firm of lawyers in Gibraltar have been appointed to provide such advice if necessary, at the Commission’s expense.

A.5.3 All directors should have access to the advice and services of the company secretary, who is responsible to the board for ensuring that board procedures are complied with. Both the appointment and removal of the company secretary should be a matter for the board as a whole.

Compliant

The Secretary to the Commission is appointed by the Board as a whole pursuant to the FSCA, and all Members have unfettered access to his advice and services.

Performance evaluation

Main Principle

The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.

Compliant

.

Supporting Principle

Individual evaluation should aim to show whether each director continues to contribute effectively and to demonstrate commitment to the role (including commitment of time for board and committee meetings and any other duties). The chairman should act on the results of the performance evaluation by recognising the strengths and addressing the weaknesses of the board and, where appropriate, proposing new members be appointed to the board or seeking the resignation of directors.

Compliant

There is an annual self appraisal by the Board members, these are discussed with the Chairman.

A.6.1 The board should state in the annual report how performance evaluation of the board, its committees and its individual directors has been conducted. The non-executive directors, led by the senior independent director, should be responsible for performance evaluation of the chairman, taking into account the views of executive directors.

Non-compliant

Annual Board evaluation of the Chairman is in place.

The performance evaluation process is described in the FSC’s web-site.

Re-election

Main Principle

All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. The board should ensure planned and progressive refreshing of the board.

Compliant

All Commission Members are appointed for a three year term and, subject to satisfactory performance, reappointed for a further three year term. 

A.7.1 All directors should be subject to election by shareholders at the first annual general meeting after their appointment, and to re-election thereafter at intervals of no more than three years. The names of directors submitted for election or re-election should be accompanied by sufficient biographical details and any other relevant information to enable shareholders to take an informed decision on their election.

Not applicable

Appointments are generally made for a period of three years.

A.7.2 Non-executive directors should be appointed for specified terms subject to re-election and to Companies Acts provisions relating to the removal of a director. The board should set out to shareholders in the papers accompanying a resolution to elect a non-executive director why they believe an individual should be elected. The chairman should confirm to shareholders when proposing re-election that, following formal performance evaluation, the individual’s performance continues to be effective and to demonstrate commitment to the role. Any term beyond six years (e.g. two three-year terms) for a non-executive director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the board. Non-executive directors may serve longer than nine years (e.g. three three-year terms), subject to annual re-election. Serving more than nine years could be relevant to the determination of a non-executive director’s independence (as set out in provision A.3.1).

Compliant

All non executive members are subject to a specific term.

The total term of office for non executives has a statutory maximum of nine years.

B.    REMUNERATION

The Level and Make-up of Remuneration

Main Principles

Levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

Mainly Compliant

Remuneration of Commission Members is at a level commensurate with other such regulatory bodies for non-executive appointments. 

The remuneration of the Chief Executive is set out in his contract of employment.

Supporting Principle

The remuneration committee should judge where to position their company relative to other companies. But they should use such comparisons with caution, in view of the risk of an upward ratchet of remuneration levels with no corresponding improvement in performance.

They should also be sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases.

Compliant

Remuneration policy

B.1.1 The performance-related elements of remuneration should form a significant proportion of the total remuneration package of executive directors and should be designed to align their interests with those of shareholders and to give these directors keen incentives to perform at the highest levels. In designing schemes of performance-related remuneration, the remuneration committee should follow the provisions in Schedule A to this Code.

Non-Compliant

The Chief Executive’s remuneration is set out in his contract of employment and next to be revised in 2012.

B.1.2 Executive share options should not be offered at a discount save as permitted by the relevant provisions of the Listing Rules.

Not applicable

B.1.3 Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role. Remuneration for nonexecutive directors should not include share options. If, exceptionally, options are granted, shareholder approval should be sought in advance and any shares acquired by exercise of the options should be held until at least one year after the non-executive director leaves the board. Holding of share options could be relevant to the determination of a non-executive director’s independence (as set out in provision A.3.1).

Compliant

Note : References to share options are not-applicable.

B.1.4 Where a company releases an executive director to serve as a non-executive director elsewhere, the remuneration report should include a statement as to whether or not the director will retain such earnings and, if so, what the remuneration is.

Not currently applicable

Service Contracts and Compensation

B.1.5 The remuneration committee should carefully consider what compensation commitments (including pension contributions and all other elements) their directors’ terms of appointment would entail in the event of early termination. The aim should be to avoid rewarding poor performance. They should take a robust line on reducing compensation to reflect departing directors’ obligations to mitigate loss.

Compliant

At Chief Executive’s appointment or re-appointment, the Remuneration Committee consider whether any changes to the current contractual arrangements are appropriate.

B.1.6 Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period.

Non Compliant

The contractual period of the Chief Executive is set at three years.  However, there are statutory provisions for early termination on the occurrence of specific events. Given the nature of the Chief Executive’s role, it is felt by the Commission that, as is the case for other regulators, a contract period of longer than one year is desirable

Procedure

Main Principle

There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.

Compliant

Not applicable save as to the Chief Executive’s who is the only executive director.

As stated above, the Chief Executive’s remuneration is established at the time of the appointment and re-appointment. There is no formal current provision to reward performance by increased remuneration during the Chief Executive’s term of office, although the Commission may do so if it sees fit.

Supporting Principles

The remuneration committee should consult the chairman and/or chief executive about their proposals relating to the remuneration of other executive directors. The remuneration committee should also be responsible for appointing any consultants in respect of executive director remuneration. Where executive directors or senior management are involved in advising or supporting the remuneration committee, care should be taken to recognise and avoid conflicts of interest.

The chairman of the board should ensure that the company maintains contact as required with its principal shareholders about remuneration in the same way as for other matters.

Not applicable

B.2.1 The board should establish a remuneration committee of at least three, or in the case of smaller companies two, independent non-executive directors. In addition the company chairman may also be a member of, but not chair, the committee if he or she was considered independent on appointment as chairman The remuneration committee should make available its terms of reference, explaining its role and the authority delegated to it by the board. Where remuneration consultants are appointed, a statement should be made available of whether they have any other connection with the company.

Compliant

The FSC has established a Remuneration Committee which covers, inter alia, the remuneration of the Senior Executives at renewal.  Three Commission members sit on this committee. The Senior Independent Member chairs this committee

The committee’s terms of reference are on the FSC web site.

No remuneration consultants have been used.

B.2.2 The remuneration committee should have delegated responsibility for setting remuneration for all executive directors and the chairman, including pension rights and any compensation payments. The committee should also recommend and monitor the level and structure of remuneration for senior management. The definition of ‘senior management’ for this purpose should be determined by the board but should normally include the first layer of management below board level.

Compliant

B.2.3 The board itself or, where required by the Articles of Association, the shareholders should determine the remuneration of the non-executive directors within the limits set in the Articles of Association. Where permitted by the Articles, the board may however delegate this responsibility to a committee, which might include the chief executive.

Compliant

Commission member’s remuneration is recommended by the Chief executive and Senior independent member.  It is usually agreed that remuneration will only increase by the rate of inflation.

B.2.4 Shareholders should be invited specifically to approve all new long-term incentive schemes (as defined in the listing Rules) and significant changes to existing schemes, save in the circumstances permitted by the Listing Rules.

Not applicable

C.    ACCOUNTABILITY AND AUDIT

Financial Reporting

Main Principle

The board should present a balanced and understandable assessment of the company’s position and prospects.

Compliant

Supporting Principle

The board’s responsibility to present a balanced and understandable assessment extends to interim and other price-sensitive public reports and reports to regulators as well as to information required to be presented by statutory requirements.

Not applicable

C.1.1 The directors should explain in the annual report their responsibility for preparing the accounts and there should be a statement by the auditors about their reporting responsibilities.

Compliant

C.1.2 The directors should report that the business is a going concern, with supporting assumptions or qualifications as necessary.

Compliant

Internal Control

Main Principle

The board should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets.

Compliant, as applicable

C.2.1 The board should, at least annually, conduct a review of the effectiveness of the group’s system of internal controls and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls and risk management systems.

Compliant

The Commission undertakes an annual review of the Commission’s internal risk assessment matrix for continued relevance and to ensure it remains comprehensive

The Commission has also obtained ISO 9001:2000 certification in respect of its quality management systems.  This is subject to an annual external audit

Audit Committee and Auditors

Main Principle

The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the Commission’s auditors.

Compliant

C.3.1 The board should establish an audit committee of at least three, or in the case of smaller companies two, independent non-executive directors. In smaller companies the company chairman may be a member of, but not chair, the committee in addition to the independent non-executive directors, provided he or she was considered independent on appointment as chairman. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience.

Compliant

Details of the Committee are publicly available

C.3.2 The main role and responsibilities of the audit committee should be set out in written terms of reference and should include:

Compliant

• to monitor the integrity of the financial statements of the Commission and any formal announcements relating to the Commission’s financial performance, reviewing significant financial reporting judgements contained in them;

Included in terms of reference

• to review the Commission’s internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the Board itself review the Commission’s internal control and risk management systems;

Included in terms of reference

• to monitor and review the effectiveness of the company’s internal audit function;

Not in terms of reference as no internal audit function

• to make recommendations to the Commission, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor  and to approve the remuneration and terms of engagement of the external auditor;

Included in terms of reference with the exception of the underlined sections.

• to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant [UK] professional and regulatory requirements;

Included in terms of reference

to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm and to report to the board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.;
 

Included in terms of reference

C.3.3 The terms of reference of the audit committee, including its role and the authority delegated to it by the board, should be made available.

A separate section of the annual report should describe the work of the committee in discharging those responsibilities.

Partially Compliant

The terms of reference of the audit, remuneration, nomination and budgetary review committees are contained on the FSC website and there is therefore no need to include this in the annual report.

C.3.4 The audit committee should review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The audit committee’s objective should be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Compliant

Informal arrangements are in place which would permit any member of staff to raise improprieties with either  the CEO or Senior Independent Member and for these to follow up such matters.

C.3.5 The audit committee should monitor and review the effectiveness of the internal audit activities. Where there is no internal audit function, the audit committee should consider annually whether there is a need for an internal audit function and make a recommendation to the board, and the reasons for the absence of such a function should be explained in the relevant section of the annual report.

Compliant

The Commission considers that the size of the organisation precludes the need for an internal audit function.  The FSC considers that its internal financial controls and procedures are sufficiently stringent to preclude, as far as is possible, financial impropriety.

C.3.6 The audit committee should have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditors. If the board does not accept the audit committee’s recommendation, it should include in the annual report, and in any papers recommending appointment or re-appointment, a statement from the audit committee explaining the recommendation and should set out reasons why the board has taken a different position.

Compliant

At first meeting of audit committee they considered tenders and decided to recommend the appointment of PwC for a period of 3 years. Commission formally ratified at their next meeting

C.3.7 The annual report should explain to shareholders how, if the auditor provides non-audit services, auditor objectivity and independence is safeguarded.

Not Applicable

With the exception of services provided in respect of regulatory supervision, no additional services are provided.

D.    RELATIONS WITH SHAREHOLDERS

Dialogue with Institutional Shareholders

Main Principle

[In responding to section D, “shareholder”  has been replaced with “Stakeholder” as the FSC does not have shareholders. Whilst stakeholder is a far wider term, the Commission believes that it is desirable to apply some of the principles regarding relations with shareholders to this wider group ]

There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.

Compliant

Supporting Principles

Whilst recognising that most shareholder contact is with the chief executive and finance director, the chairman (and the senior independent director and other directors as appropriate) should maintain sufficient contact with major shareholders to understand their issues and concerns.

The board should keep in touch with shareholder opinion in whatever ways are most practical and efficient.

Compliant

The Commission meets with representatives of the industry and Government of Gibraltar on a regular basis.

D.1.1 The chairman should ensure that the views of shareholders are communicated to the board as a whole. The chairman should discuss governance and strategy with major shareholders. Non-executive directors should be offered the opportunity to attend meetings with major shareholders and should expect to attend them if requested by major shareholders. The senior independent director should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders.

Compliant

The senior independent member, along with all other members meets with stakeholders on a regular basis.

D.1.2 The board should state in the annual report the steps they have taken to ensure that the members of the board, and in particular the non-executive directors, develop an understanding of the views of major shareholders about their company, for example through direct face-to-face contact, analysts’ or brokers’ briefings and surveys of shareholder opinion.

Compliant

D 2 Constructive Use of the AGM

Main Principle

The board should use the AGM to communicate with investors and to encourage their participation.

Not compliant

As the FSC is not a company with shareholders it does not hold annual general meetings of the type envisaged by this principle.