The UK's Financial Reporting Council (FRC) has removed its tier three category of asset managers, which suggested they required improvement, in their adherence to its stewardship code.

The FRC launched an assessment in December 2015 of the signatories to the code which was created in 2010. When the results of the assement were announced in November last year, the FRC said 80 asset managers were graded as tier 1 and 40 as tier 3. Tier 3 asset managers were given a period of time to improve their reporting or be removed from the list of code signatories.

The regulator said it engaged with tier 3 signatories and about 20 improved their statements to tier 1 or tier 2 standard, whilst the other half chose to remove themselves from the list of signatories. The Tier 3 category has now been removed. All the service providers, such as Manifest, were rated as tier 1 standard, while asset owners were split into tier 1 and tier 2 categories. Tier 1 asset managers include Fidelity Investments, Aberdeen Asset Management, State Street Global Advisors and Baillie Gifford.  Oxford Capital, Edinburgh Partners, Canada Life Asset Management and Nomura Asset Managers are among the tier 2 asset managers.

Tier 1 signatories are described as providing a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary while tier 2 signatories meet many of the reporting expectations but report less transparently on their approach to stewardship or do not provide explanations where they depart from provisions of the Code. The FRC said these descriptions allow clients to discuss with asset managers their different approaches to stewardship, therefore ensuring they best meet their needs. The FRC added that it would be looking for continuous improvement from Code signatories.

The FRC said the formal consultation on its corporate governance code, being held later this year, would include broad initial questions about its approach to the review of the stewardship code. It will consider how to raise reporting standards and whether the tiers are set at the appropriate level. A detailed consultation on specific changes to the stewardship code will follow in 2018.