The Financial Conduct Authority (FCA) has published its ninth edition of Primary Market Bulletin (PMB 9). Click here to read the edition. The edition sets out the FCA's proposed changes to technical guidance in the UKLA Knowledge Base and addresses certain areas where it considers there has been poor compliance by market participants.
UKLA identifies areas of non-compliance
The UKLA has recently undertaken a review of certain areas governed by the Listing Rules (LRs) and the Disclosure and Transparency Rules (DTRs). In PMB 9, the FCA identifies and addresses two key areas where there has been poor compliance by market participants.
Transactions by persons discharging managerial responsibilities (PDMRs) and their connected persons
DTR 3 sets out notification requirements for issuers, PDMRs and their connected persons. The purpose of the provisions is to achieve transparency of the transactions of PDMRs of issuers and, if applicable, persons closely associated with them, so that there is a proper and timely flow of information to the market, and to prevent market abuse by persons who are deemed to have access to inside information of the issuer. The UKLA has noted, however, that some PDMRs, their connected persons and issuers have failed to meet these requirements. In particular, the UKLA has concerns around certain PDMRs entering into arrangements with third parties in which the third party agrees to make the required notification to the issuer on the PDMR's behalf. Consequently, the FCA proposes to amend the existing technical note TN/540.2 'Transactions by persons discharging managerial responsibilities (PDMR) and their connected persons'to clarify that, notwithstanding any such delegation, the PDMR is responsible for satisfying the applicable DTR 3 requirements and remains liable if the notification is not made.
In the light of its concerns, the FCA states that it will consider taking public disciplinary action for any breaches of DTR 3, which could, among other outcomes, lead to a public censure of the relevant party, although the FCA notes that the outcome in each case will depend on the gravity of the breach.
Seeking sponsor guidance
The FCA has always conveyed a strong message that sponsors are critical to the integrity of the premium listing regime. One of the key roles of a sponsor is to ensure that issuers are properly advised of their obligations on material transactions so that the interests of shareholders are protected. The FCA emphasises the importance of the role by reminding premium-listed issuers that they must obtain the guidance of their sponsor when proposing to enter into a transaction which could amount to a class 1 transaction, a reverse takeover or a related party transaction.
Revised technical notes under consultation
The FCA is consulting on proposed amendments to three of its existing technical notes. In addition to the technical note relating to PDMR transactions (as mentioned above), the FCA proposes amendments to the following notes:
Ratification circulars (UKLA/TN/204.2)
The technical note provides guidance on ratification circulars which arise when a resolution is put to shareholders proposing to ratify some action or inaction by the directors which has resulted in an actual, or potential, breach of law or regulation. In particular, the note sets out the circumstances in which such proposals could be viewed, and should be treated, as related party transactions under LR 11. The FCA is proposing to amend the technical note to clarify that, when assessing whether the potential benefit to directors is only an ancillary or unintended effect of the circular, the FCA believes that it is difficult to come to this conclusion where a specific resolution (or part of a resolution) in the circular has the effect of expressly releasing the directors from liability.
Hostile takeovers (UKLA/TN/305.2)
The FCA is proposing to amend this note to remove references made to the Listing Rule requirement for a premium listed issuer to prepare a 28 day circular which was deleted with effect from 1 October 2014.
New guidance in the Knowledge Base
The FCA has published a new technical note – Non-equity prospectuses aimed at retail investors (UKLA/TN/632.1) in the Knowledge Base. The draft technical note was published in PMB 7 for consultation and sets out new guidance applying to the issue of bonds aimed at retail investors. In particular, the new technical note provides practical guidance for practitioners who are preparing prospectuses for such transactions.
Ongoing guidance review
In PMB 9, the FCA notes that it is considering the feedback received on the guidance presented for consultation in PMB 8 and the new technical note presented for consultation in PMB 7 which addresses sponsors' obligations under the LRs to deal with the FCA in an open and co-operative way. The FCA hopes to respond to the feedback in its next edition of PMB. For background to the proposed guidance, click here to read our report on PMB 7 and here to read our report on PMB 8.
Responses to the consultation must be submitted by 12 January 2015.