MAR – FCA Policy Statement on the implementation of the Market Abuse Regulation

The Financial Conduct Authority has published a Policy Statement on the implementation of the Market Abuse Regulation (MAR), which includes feedback on two previous consultations CP15/35 and CP15/38. The FCA has also published the Market Abuse Regulation Instrument 2016, which sets out the final amendments to the FCA Handbook.

In summary, the FCA confirms that it is proceeding with the majority of its proposals with some notable exceptions. For an overview of the FCA's conclusions – click here.

MAR applies from 3 July 2016 and the Market Abuse Regulation Instrument 2016 will come into force on the same date.

MAR – LSE consultation on changes to AIM Rules ahead of the Market Abuse Regulation  

The London Stock Exchange has published a consultation proposing changes to the AIM Rules for Companies in light of MAR. The proposals include:

  • amending the guidance note to AIM Rule 11 (General disclosure of price sensitive information);
  • deleting from AIM Rule 17 the obligation for a company to notify information relating to directors' dealings on the basis that this is superseded by MAR; and
  • setting out a new AIM Rule 21 requiring AIM companies to put in place a share dealing policy.

Comments must be submitted to the LSE by 12 May 2016. To read our client update issued at the time - click here.

The LSE has also published an edition of Inside AIM focused on MAR compliance. For an overview – click here and scroll to the second item.

MAR – Company Secretaries' Forums at AG

We will be holding Company Secretaries' Forums focused on MAR in each of our UK offices as follows:

  • London on 10 May 2016 - 9.00am start
  • Manchester on 26 May 2016 - 9.00am start
  • Leeds on 26 May 2016 - 5.00pm start

If you would like to join us, please email Sophie Jennings, indicating which Forum you would like to attend.

FRC - Revised UK Corporate Governance Code, audit committee guidance and auditing and ethical standards

The Financial Reporting Council has published a final draft of the changes it proposes to make to the UK Corporate Governance Code, its Guidance on Audit Committees and its ethical and auditing standards as a result of the implementation of the EU Audit Regulation (EU 537/2014) and the EU Audit Directive (2014/56/EU).

By way of reminder, the Regulation has direct effect, and the Directive will be implemented from, 17 June 2016. No effective date has been given by the FRC for the revisions to the Code, its Guidance or the standards but it is anticipated that they will apply to financial periods beginning on or after 17 June 2016.

In overview, key measures which will impact on public interest entities (i.e. listed companies, credit institutions and insurance undertakings) include:

  • mandatory rotation of statutory auditors every ten years which may be extended if a tender is undertaken for a further period of ten years;
  • introducing a cap on fees for non-audit services limiting them to 70% of the average fees paid for audit services over the previous three consecutive financial years;
  • introducing restrictions on the scope of non-audit services which may be provided to avoid an auditor's independence being compromised; and
  • prohibiting clauses in agreements between any company and a third party the effect of which is to restrict the choice of auditor.

The principal changes to the Code being carried forward are:

  • the addition to Code Provision C.3.1 that: "The audit committee as a whole shall have competence relevant to the sector in which the company operates". The proposed change requiring at least one member of the audit committee to have"competence in accounting and/or auditing" has not been made. The current formulation of "recent and relevant financial experience" will be retained;
  • principal C.3.7 will be amended to remove the recommendation that FTSE 350 companies should put their external audit contract out to tender at least every ten years. This removes the duplication between the Code and the provisions of the corresponding 2015 Competition and Markets Authority Order. The reference in provision C.3.7 to the audit committee having primary responsibility for making the recommendation on the appointment, reappointment and removal of the external auditors has been retained; and
  • the proposed change to provision C.3.8 to provide that the annual report should include advance notice of external auditor retendering plans has been made, but qualified to ensure that reporting is only undertaken when focused and relevant.