Equity Capital Markets

FCA issue £4.6m fine for breaches of related party rules

Our latest CQC update covers, among other matters:

  • The Financial Conduct Authority's (FCA) £4.6m fine for Asia Resource Minerals plc (formerly Bumi plc) for various breaches of the Listing Rules and Listing Principles primarily stemming from the company's failure to indentify, monitor and disclose related party transactions totalling just over £8m; and
  • the NAPF's call for meaningful reporting by companies on their workforces.

Proposed changes to the Listing Rules

The FCA has published its most recent Quarterly Consultation proposing changes to its Handbook. The most noteworthy proposals are those seeking to amend the Listing Rules and Disclosure and Transparency Rules to reflect the publication and contents of the 2014 UK Corporate Governance Code. Responses are required by 5 August 2015.

FCA launches study into investment and corporate banking

The FCA has commenced a study into competition in investment and corporate banking and will focus on:

  • choice of banks and advisers for clients;
  • transparency of the services provided by banks; and
  • building and cross-subsidisation of services.

Market Tracker Trend Report: Trends in Rights Issues 2014

Lexis have published a report aimed at providing insight into recent trends in rights issues in the UK. There were a number of high profile rights issues in 2014, including those of the LSE itself and Mothercare plc. 16 rights issues in total in the year (2013: 8) accounted for 7.5% of all secondary offers (2013: 4%). The current run rate of rights issues in 2015 suggests a similar year to 2014 in terms of volume.

Public M&A

Experian Business Research Monthly Review

Experian has published its latest monthly review of M&A transaction activity finding:

  • UK M&A and ECM transactions dipped to under 400 during April for the first time since June 2013 – a decline of 13%;
  • activity in the Financial Services' sector accounted for more than one third of UK deals; and
  • in Asia Pacific, Chinese businesses were most active being responsible for 33.4% of all transactions in the region with manufacturing being the most prevalent sector involved.

Recent M&A downturn in 2015

Merill Datasite has published a new edition of their Monthly M&A Insider which outlines a downturn in worldwide M&A in 2015, compared to the high volume of deals seen in 2014. April 2015 saw 917 deals globally valued at US$293.1bn, which, when compared to the results in previous years, is a decline of 21.5% in value and 39% in volume.

However, despite the overall fall in global numbers, there have been a number of promising sectors and geographies keeping activity afloat.

Governance,  Reporting and Compliance

FRC Developments

The Financial Reporting Council (FRC) has published two recent updates of interest.

The first heralds the launch of a programme of measures to help smaller listed and AIM companies improve the quality of their corporate reports. This follows concerns expressed by the FRC over a number of years at the high number of poorer quality annual reports produced by such companies as compared with their larger counterparts.

The second is the publication of a practice aid to assist audit committees in evaluating audit quality. This sets out a number of issues of which audit committees may wish to take account when designing or updating their own assessment processes.

New sentencing guidelines for large companies applied

In R v Thames Water Utilities Ltd [2015] EWCA Crim 690, the Court of Appeal has applied the new sentencing guidelines put in place to calculate fines for large companies (those with a turnover of £50m or more) who have committed environment offences. The fine imposed on Thames Water for serious pollution of a nature reserve was £500,000, reduced by 50% on the basis of various mitigating factors and a prompt guilty plea. Under the guidelines, fines could be levied up to 100% of a company's pre-tax net profit for the relevant year and the Court stated in its judgment that this would be the case “even if this results in fines in excess of £100m.”

ESMA to review Proxy Voting

The European Securities and Markets Authority (ESMA) has outlined its plans to conduct a review of the Best Practice Principles for Providers of Shareholder Voting Research and Analysis. The Principles were first published in March 2014 – click here.

ESMA intends to gather information on how stakeholders view the most recent AGM seasons and consider any new trends or changes in the approach of proxy advisors.

Responses are required by 27 July 2015 with the aim being to publish the final results at the end of 2015. The conduct of proxy voting agencies was the subject of some heated debate at our recent Company Secretaries' Fora. It is something that the FRC is also seeking to address.