Included in this issue: Proposed changes to the Listing and Disclosure Rules | Market Abuse Regulation (MAR): further clarity brought to implementation | AIM: guidance on disclosures relating to equity financing products | A single portal for EU wide market announcements? | AIM: private censure and fine for breach of Nomad Rules | Takeover Panel publishes Practice Statements dealing with Rule 21.2 (Offer related arrangements) and Rule 20.2 (Information required for the purposes of obtaining regulatory consents) | LSE publishes 2016 Dividend Procedure Table | FRC culture project and the role of boards | FRC consultation on revisions to UK Corporate Governance Code, auditing and ethical standards, and guidance for audit committees | Global Boardroom Insights: Calibrating Risk Oversight | NAPF: 2015 AGM Season Report

Equity Capital Markets

Proposed changes to the Listing and Disclosure Rules

The Financial Conduct Authority (FCA) has published its latest quarterly consultation paper which outlines proposals for a number of relatively significant amendments to the Listing Rules (LR) and Disclosure and Transparency Rules (DTR) including:

  • proposing the deletion of LR 5.2.11DR which had been added as part of the package of amendments in May 2014 designed to enhance the effectiveness of the listing regime where an issuer has a controlling (30%+) shareholder but had the inadvertent consequence in the circumstances of a takeover offer of allowing such a shareholder to cancel a listing and yet avoid minority shareholder protections;
  • implementing particular parts of the Statutory Audit Amending Directive. The FCA is focusing on the implementation of changes to the requirements for public interest entities' audit committees through amendments to DTR 7. Proposals include requiring a majority of the members of an audit committee, including the chairman, to be independent (instead of a single member as is the case now) and the body as a whole to have competence relevant to the sector in which the company operates (see the Financial Reporting Council (FRC) consultation on amendments to the UK Corporate Governance Code below); and
  • amending the corporate governance rules in DTR 7 to reflect the transposition of the Accounting Directive (2013/34/EU).

Responses to the consultation are requested by 5 November 2015.

Market Abuse Regulation (MAR): further clarity brought to implementation

The European Securities and Markets Authority (ESMA) has published its final technical standards in relation to the Market Abuse Regulation. You will remember that MAR comes into force on 3 July 2016.

The recommendations relate to the operation of MAR relative to buybacks and stabilisation measures, market soundings / "wall-crossing", the disclosure of inside information (including delaying disclosure), the creation and maintenance of insider lists and disclosure of transactions by persons discharging managerial responsibility (PDMR).

ESMA has made a number of changes to the technical standards since the consultation draft including:

  • slightly reducing the content requirements for insider lists relative to the proposals in the consultation, although these will still be significantly more onerous to compile and maintain than they are currently;
  • providing more flexibility for issuers by allowing the production of a single insider list with different sections instead of mandating separate project specific lists and a further list detailing permanent insiders;
  • publishing a single template with slightly reduced disclosure requirements (relative to the consultation draft) for both the private and public notification of each transaction in the securities of the issuer by PDMR. Note that these disclosure obligations are also more onerous than the current requirements. It remains to be seen at what level the FCA will set the threshold above which PDMR transactions must be disclosed as is permissible under MAR;
  • altering the notification requirements when an issuer delays the disclosure of inside information. It remains to be seen whether the FCA will require the notification of every instance of delay by an issuer or will only expect that information to be provided on request. In any event, the change will necessitate far more detailed records being kept of the analysis of the status of inside information; and
  • amendments to the provisions relating to market soundings, including to clarify that where an issuer and its financial adviser jointly conduct a market sounding, each must comply with the new regime.

The European Commission now has three months to consider the standards, although it seems unlikely that they will alter significantly. To that end, we expect the FCA to consult on the implementation of MAR by the end of October. This consultation is likely to focus on the changes the FCA will need to make to, for example, DTR 2 and DTR 3, the Model Code and the Code of Market Conduct in relation to which it has very little discretion.

AIM: guidance on disclosures relating to equity financing products

The London Stock Exchange (LSE) has published an "Inside AIM" update providing guidance on AIM company disclosures regarding equity financing products involving AIM securities in which a company or its directors are interested. These products can include equity lines of credit, swap facilities and certain crowd funding products for the AIM company, and share sale and repurchase agreements involving AIM company directors.

A single portal for EU wide market announcements?

ESMA has published its final report on plans for a European Electronic Access Point (EEAP) – in other words a means of accessing all regulated information (such as annual reports and major shareholding notifications) published by issuers in accordance with their obligations in each Member State – e.g. as takes place via the RNS in the UK. This is designed to facilitate access to information published by listed companies across the EU. Note that the EEAP will not replace existing mechanisms which act as repositories for such information, e.g. the UK's National Storage Mechanism.

The European Commission now has three months to endorse the proposals.

AIM: private censure and fine for breach of Nomad Rules

The LSE has announced that a nominated adviser (Nomad) had been privately censured and fined £75,000 for breaching rule 19 (liaison with the LSE) and rule 23 (proper procedures) of the AIM Rules for Nominated Advisers (Nomad Rules).

The Nomad was censured due to a failure to implement changes it had agreed to make relating to certain issues with its procedures that had been identified by the AIM Regulation team during a formal review of the Nomad's work pursuant to rule 26 of the Nomad Rules.

Public M&A

Takeover Panel publishes Practice Statements dealing with Rule 21.2 (Offer related arrangements) and Rule 20.2 (Information required for the purposes of obtaining regulatory consents)

The Takeover Panel Executive has published two new Practice Statements. Practice Statement No.29 provides guidance on the Executive's interpretation and application of Rule 21.2 which contains the prohibition on certain offer-related arrangements. In particular, the guidance covers:

  • certain exclusions to the Rule 21.2 prohibition;
  • "Bid-Conduct Agreements" and, in particular, those provisions which the Panel Executive do not believe are permitted to be included in such agreements; and
  • inducement fee agreements in the limited circumstances where a target may agree to pay such a fee.

Note that Practice Statements No.23 and No.27 have been withdrawn on the basis that relevant sections from each have been reproduced in Practice Statement No.29.

Practice Statement No. 30 deals with how the Executive considers that the requirements of Rule 20.2 (Equality of information to competing bidders) may be complied with where commercially sensitive information is supplied to lawyers or economists advising a bidder on an "outside counsel only" basis for the purposes of enabling them to consider the need for and, if necessary, obtain a regulatory consent where there is a competing bidder.

Governance, Reporting & Compliance

LSE publishes 2016 Dividend Procedure Table

The LSE has published its 2016 Dividend Procedure Table which listed and AIM companies should comply with when declaring and paying dividends to shareholders. The timetables sets out the timing of announcements, record dates, ex dates and payment dates for dividends in 2016.

FRC culture project and the role of boards

The FRC has published an invitation to participate in an initiative to obtain practical insight into corporate culture and the role of boards. The FRC intends to publish a report of observations and activity, identify best practice and develop resources to help boards take action on culture, and to replace the FRC's March 2011 guidance on board effectiveness. Those interested should contact the FRC by 30 October 2015.

FRC consultation on revisions to UK Corporate Governance Code, auditing and ethical standards, and guidance for audit committees

The FRC has published a consultation paper outlining proposals to amend auditing standards, ethical standards for auditors, the UK Corporate Governance Code and its Guidance for Audit Committees. For further detail on the proposed changes, please read our latest CQC – Compliance for Quoted Companies update which can be found in the link above.

Global Boardroom Insights: Calibrating Risk Oversight

KPMG have published the latest edition of Global Boardroom Insights which invites directors and risk professionals to share their experiences in relation to how boards are strengthening their oversight of risk. Reproduced here with KPMG's kind permission.

NAPF: 2015 AGM Season Report

The National Association of Pension Funds has published its third annual review of the preceding AGM season. Overall, the NAPF's review suggests a further year of pay restraint and limited shareholder rebellions, although it identifies 12 companies within the FTSE 350 where a significant proportion of shareholders expressed discontent with particular aspects of their governance arrangements. A press release which summarises the key issues contained within the Report can be found here