Market Abuse Regulation

FCA issues clarification on the issue of preliminary announcements and closed periods and publishes Primary Market Bulletin containing MAR notification forms

One of the most significant outstanding issues in relation to the impact of the EU Market Abuse Regulation No.596/2014 (MAR) was how to interpret closed periods in Article 19(11) of MAR in light of a preliminary announcement made pursuant to LR 9.7A.1R.

The Financial Conduct Authority (FCA) has announced that, pending clarification from the European Commission (Commission) and the European Securities and Markets Authority, it will continue to take the view that where an issuer announces preliminary results, the closed period exists immediately before the preliminary results are announced. Under MAR, the length of the ‘closed period’ will be 30 days.

The FCA has also published the 15th edition of its Primary Market Bulletin which is described as a "special edition" as it focuses solely on the implementation of MAR. In particular, it publishes two forms for use when submitting notifications to the FCA by:

  • issuers which have delayed the announcement of inside information to the market in accordance with Article 17(4) of MAR – click here. Such notifications must be made to the FCA immediately following the public announcement of the information; and
  • PDMR and those persons closely associated with them in relation to transactions conducted on their account in or related to the financial instruments of a relevant issuer in accordance with Article 19 of MAR – click here. Such notifications must be made promptly and no later than three business days after the date of the transaction.

For further detail, please read our CQC – Compliance for Quoted Companies update issued at the time – click here.

MAR: final draft delegated regulation relating to market soundings

The Commission has published the final draft text of its delegated regulation supplementing MAR with regard to regulatory technical standards for the appropriate arrangements, systems and procedures for conducting market soundings.

The revised draft contains a new recital 5, specifying that a disclosing market participant should be considered to be acting within the normal course of employment, profession or duties only insofar as it complies with all requirements, including record-keeping requirements, set out in Article 11 of MAR and the delegated regulation.

The publication of the regulation in the Official Journal and its entry into force are subject to the European Parliament and Council not opposing it. While further amendments seem unlikely, it is possible that a final form of the regulation will not be published until after 3 July 2016 when MAR comes into force.

Brexit

Brexit considerations for boards and directors

The Institute of Chartered Secretaries and Administrators (ICSA) has published an article entitled 'Boards and Brexit' which focuses on the key issues and immediate considerations for boards and directors to address in relation to Brexit.

Corporate Governance

Pre-emption rights: Pre-Emption Group template resolution and monitoring report

The Pre-Emption Group has published a monitoring report and press release on the implementation of its 2015 Statement of Principles for disapplying pre-emption rights together with template resolutions.

The monitoring report shows that, in general, the 2015 Statement of Principles was adhered to and reinforces the importance of engagement between a company and its shareholders. Having considered the monitoring exercise and investor representatives' views on best practice, the Pre-Emption Group has published split template resolutions for disapplying pre-emption rights which it expects companies to consider for their next meeting and use for those held after 1 August 2016.

For further detail, please read our CQC – Compliance for Quoted Companies update issued at the time – click here.

ICSA launches consultation on the practice of minuting meetings

The ICSA has published a consultation on the practice of minuting board meetings with a view to it publishing guidance on best practice in due course. Responses are requested by 24 June 2016.

QCA publishes May edition of 'Directors' know how'

The Quoted Companies Alliance (QCA) has published its latest edition of ‘Directors’ know how’. The article includes an update on several issues including:    

  • the Pre-Emption Group's report and template resolutions – see above; and
  • the joint ICSA and EY research report on how companies are improving their nomination committees.

Investment Association letter to FTSE chairs regarding board oversight of profit expectations and dividend policy

The Investment Association has written to the chairs of listed companies informing them of its intention to "Amber Top" the re-election of non-executive directors of companies making significant changes to profit expectations and writing down the value of assets following the appointment of new management. In the Investment Association's view this practice evidences insufficient oversight by independent directors and the audit committee.

SBEEA – Persons with significant control

Statutory guidance on meaning of ‘significant influence or control’ for companies now in effect  

Companies House has published a final version of the statutory guidance on the meaning of 'significant influence or control' for companies to assist in determining if a person satisfies either the fourth or fifth condition for having significant control over a company. The version for LLPs is still before Parliament awaiting approval but is expected to be implemented from 24 June 2016.

Succession planning and the role of the nomination committee

FRC feedback statement on succession planning

The Financial Reporting Council (FRC) has published a feedback statement, summarising responses to its October 2015 discussion paper on succession planning on UK boards (UK Board Succession Planning). The feedback statement sets out responses and suggestions for improvement in the six key areas covered by the discussion paper:

  • how effective board succession planning is linked to business strategy and culture;  
  • the role of the nomination committee;  
  • board evaluation and its contribution to board succession;  
  • identifying the internal and external "pipeline" for executive and non-executive directors;  
  • ensuring diversity; and  
  • the role of institutional investors.

There was support for further guidance, in particular on the issues of the role of the nomination committee and reporting on succession planning. Given the links with the FRC’s current Culture Coalition Project, guidance in this area will be considered as part of the revision of the Guidance on Board Effectiveness, which will begin later this year. For the current reporting season, the FRC will review and analyse nomination committee disclosures and comment on its findings in the 2016 Developments in Corporate Governance and Stewardship Report which is usually published towards the end of the year.

Tax transparency and corporate crime

List of countries committed to automatic exchange of beneficial ownership information published

The list of countries committed to automatically exchange information on beneficial ownership has been published by HM Treasury. The list evidences an increase in the number of countries committing to do so since the statement by the Chancellor launching this initiative. The next stage will be the development of a global standard for the exchange of this information.

The scope of the criminal offences of a corporate ‘failing to prevent’ bribery and tax evasion to be extended

As part of the Anti-Corruption Summit, the Ministry of Justice has announced plans to tackle corporate fraud. The consultation will seek views on extending the scope of the criminal offence of a corporate ‘failing to prevent’ bribery under s7 Bribery Act 2010, to other economic crimes including money laundering and fraud. The consultation will be published at some point this summer.

Equity Capital Markets – Related Party Transactions

UKLA guidance notes: Primary Market Bulletin No 14 (smaller related party transactions)

The FCA has published the fourteenth edition of Primary Market Bulletin in which it is consulting on changes to its technical note dealing with related party transactions - Modified requirements for smaller related party transactions (UKLA/TN/308.3). The proposed amendments reflect the previous rule changes which altered the regime as regards "Smaller" related party transactions under LR 11.1.10R and highlights the potential need for sponsors to contact the FCA for guidance if, in being asked to provide its letter to the listed company that the terms of the transaction is "fair and reasonable", it has concerns about whether the transaction in question has been correctly classified.

Comments must be submitted to the FCA by 8 June 2016.