The Financial Services Authority has issued a statement making it clear that the Disclosure and Transparency Rules (DTRs) apply to the granting of security by directors and certain other persons over shareholdings in their company. Accordingly granting such security must be disclosed to the company, which is then required to notify the market. The position had been considered to be unclear, in particular following certain recent company announcements, including by Carphone Warehouse PLC concerning the resignation of David Ross following his notification that he had pledged shares to secure personal loans.  

The DTRs apply to listed companies and the disclosure requirement extends to other "persons discharging managerial responsibilities" in such companies and to connected persons.  

The FSA has stated that:  

(a) it will not pursue enforcement action where directors or their companies have not previously made the necessary disclosures;  

(b) but the FSA expects all outstanding disclosures to be made by 23 January 2009; and  

(c) since the rules in question are drawn from the EU Market Abuse Directive the FSA is seeking to reach a common understanding on the detailed interpretation of the requirements with its counterparts in the EU.  

The FSA has also emphasised that the separate requirements in the Model Code on securities dealings (annexed to the UK's Listing Rules) continue to apply. The Model Code clearly applies to the granting of security over securities in a company and requires that directors and senior executives must pre-clear any such dealings. The FSA is encouraging listed issuers to deal with breaches of the Model Code.  


This clarification is helpful given the degree of uncertainty in the market recently. The moratorium on action until the 23 January deadline will be welcome to many directors and senior executives taken by surprise by the discussion of the DTR disclosure requirements in the context of the announcements by Carphone Warehouse and others.  

It is clear that practice, and indeed forms of pledging, differs across the EU and it is notable that the FSA has nevertheless decided to impose its own stricter interpretation on the rules without the final resolution of these differences at EU level, perhaps indicating that agreement on these issues will take some time.  

It is also accepted that the granting of security by directors and their families in shares traded on AIM must be disclosed under the AIM Rules for Companies.