In this issue, we examine PERG's latest annual review of compliance with the Walker Guidelines, a new statement by AIM Regulation on the use of social media, and gender pay gap reporting.


The Private Equity Reporting Group ("PERG") has published its 2016 report on compliance with the Walker Guidelines, covering the reporting season to 30 April 2016. The report makes for disappointing reading for those interested in corporate reporting by private equity firms and portfolio companies.


The Walker Guidelines were adopted in 2007 at the recommendation of Sir David Walker for his review into the adequacy of disclosure and transparency in private equity. They require PE firms and portfolio companies to make additional disclosures if they meet certain criteria.

The idea is that, by providing this additional information, PE firms can substantiate their contribution to the UK economy. Compliance with the guidelines is benchmarked against FTSE 350 companies.


All in all, compliance appears to be falling year on year. For example, overall compliance by portfolio companies was 88 per cent in 2016, down from 95 per cent in 2015. More significantly, the proportion of portfolio companies in the sample set that achieved "good" or "excellent" compliance in 2016 was 57 per cent, down substantially from 95 per cent in 2015 and 100 per cent in 2014.

As in 2015, PERG attributes this fall to improvements in reporting among FTSE 350 companies, so raising the benchmark for compliance with the Guidelines. It also notes that nearly half of the sample set were new to the process and may be taking time to get up to speed. Nevertheless, this is a striking fall and suggests private equity-backed groups are failing to keep pace with the FTSE 350 benchmark.

Publication of financial information

The proportion of portfolio companies that included a statement of compliance with the Guidelines in their annual report remained static at 40 per cent.

Against this, though, 20 per cent of portfolio companies covered by the Guidelines had not published their audited report and accounts on their website at the time of the report, and an even greater proportion did not publish their accounts within six months of year-end. While some companies produced an "annual review" of disclosures required by the Guidelines instead of their annual report and accounts, PERG feels that this is not an acceptable alternative to publishing the company's financials.

Finally, the Guidelines require companies to produce a mid-year report within three months of their mid-year. This does not involve publishing interim financials, but rather a brief narrative update. However, more than half of companies did not do this.

In response, PERG has said that, next year, it will name companies that fail to publish their mid-year update or their annual report and accounts on their website within the timescales in the Guidelines.

Practical implications

Compliance with the Guidelines is voluntary. Portfolio companies and PE firms do not face any sanction for noncompliance.

However, PERG is clearly disappointed by this year's review, as shown by its proposal to start "naming and shaming" companies. PE firms will no doubt wish to consider this when assessing their disclosures for the 2016-2017 reporting season.


AIM Regulation has published a statement on Inside AIM covering the interaction of social media with AIM companies' disclosure obligations under the AIM Rules for Companies.


Regulators are beginning to respond to the increased use by businesses of social media, such as Twitter and Facebook, to promote themselves and their products.

For example, in September this year, the Takeover Panel made changes to the Takeover Code to limit the kinds of information that can be disseminated via social media during an offer period.

Interaction with RIS notifications

The Inside AIM statement reminds AIM companies that notification under the AIM Rules using a regulatory information service ("RIS") takes precedence over announcements via social media. Releasing information through social media is not an alternative to making an official announcement.

The statement links announcements on social media with potential breaches of AIM Rules 10 and 11. These require AIM companies to ensure that notifications are published via an RIS

no later than they are elsewhere, and to disclose without delay any new developments that are not public knowledge.

AIM Regulation reminds companies that the London Stock Exchange will investigate suspected breaches of AIM Rules 10 and 11 and take disciplinary action. This may include requiring a clarification notification if comments made on social media are inconsistent with an RIS notification. Ultimately, the Exchange may suspend a company's shares from trading if there is an unusual move in its share price.

The statement also notes that premature or selective disclosure, and communications designed to cause share-price volatility, may give rise to consequences under the Market Abuse Regulation.

Systems, procedures and controls

AIM Regulation recommends that AIM companies using social media and their nomads consider how to monitor the release of information. AIM Rule 31 requires AIM companies to put procedures and controls in place to ensure they comply with the AIM Rules. These should take the use of social media and other forms of electronic communications into account.

In practice, AIM companies should put in place a communications policy covering (among other things) the use of social media and discussions with their nomad before releasing information via social media.

The policy should also cover monitoring social media to remain abreast of relevant social media posts by others. This is important to allow an AIM company and its nomad to decide whether there are any potential disclosure requirements to avoid a false market being created in the company's shares.

Practical implications

In making this statement, the Exchange is laying down its expectations of AIM companies going forward. Loose leaks of information and market speculation via social media may well lead to enforcement action by the Exchange.

Most AIM companies will already have communications policies covering these issues. For those that don't, now may be a good time to consider putting them in place.


The Government has laid a draft of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 before Parliament. The draft regulations can be found here.

The regulations, if approved, will require employers with 250 employees or more to publish annual metrics on gender pay gaps, including the differences between the mean and the median hourly pay rates and bonus pay of male and female fulltime employees, the proportion of male and female employees who were paid bonuses, and the proportion in each of the four pay quartiles.

Our Employment team have put together a note on the draft regulations, which can be found here.