On 30 March, the Financial Conduct Authority (FCA) published the eleventh edition of its Primary Market Bulletin (PMB No. 11) in which it announced:

  • that it is consulting on proposed changes to existing technical notes relating to a number of areas and several new technical notes in respect of closed-ended investment funds; and
  • the publication of new and amended guidance in its Knowledge Base (previously published for consultation in PMB Nos. 8 and 9).

PMB No. 11 also sets out how the recent changes to the FCA's structure as outlined in its Business Plan for 2015/16 will impact the primary market functions carried out by the UKLA Department.

What are the proposed changes?

To read the proposed new guidance in full, click here, otherwise read on for our outline of the key proposals under consultation.

Sponsors: conflicts of interest – UKLA/TN/701.2

The FCA has been asked to provide further guidance on the requirement for sponsors to identify conflicts of interest in circumstances which may fall outside their formal appointment as sponsor. In particular, the FCA notes the practical challenges in carrying out full conflicts checks in certain situations, for example where a sponsor has been asked to:

  • provide early guidance to an issuer, where such a service falls within the LR definition of a 'sponsor service' (for example, any preparatory work carried out before a firm decides whether or not it will act as sponsor for the listed company, or applicant, or in relation to a particular transaction); or
  • provide sponsor services outside of normal office hours or as a matter of urgency (for example, in a 'rescue' situation).

The proposed amendments provide guidance on the FCA's expectations in these situations. Amongst other things, the technical note provides that the FCA expects sponsors carrying out sponsor services to take all reasonable steps to identify and manage conflicts that could adversely affect its ability to perform its functions properly under Listing Rule (LR) 8. In the specific situations set out above, the FCA acknowledges that it may be reasonable for sponsors to conduct less extensive conflict checks on a temporary basis. However, in such situations, full conflict checks should be performed as soon as practicable in accordance with the sponsor's usual procedures. The FCA also expects that sponsors appropriately train their staff to enable them to'identify, escalate and manage conflicts of interest'.

Block listings – UKLA/PN/907.2

This procedural note has been amended to clarify when closed investment funds with premium management arrangements would be granted a block listing.

Approval of circulars – UKLA/TN/206/1Circulars not requiring approval – UKLA/TN/303.1

These technical notes are proposed to be deleted to reflect the changes to LR 13 on 1 April which provide that, after this date, only circulars relating to particular types of transactions will require the FCA's approval.

Related party transactions – modified requirements for smaller related party transactions – UKLA/TN/308.2; Related party transactions – content of RIS announcement – UKLA/TN/309.2

It is proposed that these technical notes are amended to reflect the changes to the LRs relating to the treatment of smaller related party transactions which came into effect on 16 May 2014. The technical notes have been amended to provide that the FCA no longer pre-approves the documentation for such transactions and that these transactions must be announced via an RIS as soon as possible.

Closed-ended investment funds

The FCA proposes to introduce the following six new technical notes to clarify the application of the LRs in relation to closed-ended investment funds:

UKLA/TN/405.1 – Investment management agreements and independence of the board

UKLA/TN/406.1 – Infrastructure funds

UKLA/TN/407.1 – Closed ended investment funds with multiple share classes

UKLA/TN/408.1 – Eligibility of closed-ended investment funds

UKLA/TN/409.1 – Master-feeder structures

UKLA/TN/410.1 – Definition of 'investment manager'

New guidance published in the Knowledge Base

The FCA has published its new and amended technical notes in its Knowledge Base following consultations in PMB Nos. 8 and 9. For background on the consultations, clickhere for our summary of PMB No. 8 and here for our summary of PMB No.9.

The new content consists of six new technical notes, eleven amended existing technical notes and one deleted technical note. PMB No. 11 summarises the feedback received on the notes during the consultation and explains any minor amendments made to the consultation versions.

Click here to read PMB No.11 and here to read the key amendments made to the consultation versions of the technical notes.

Next steps

Responses to the consultation must be submitted by 11 May 2015. If you have any queries or comments on the consultation, please contact your usual contact at Hogan Lovells or one of the listed contacts.