From 1 October 2017 all issuers of securities admitted to an EU regulated market, such as companies with a premium or standard listing on the UK Main Market, will need to have a Legal Entity Identifier (LEI) in order to make valid regulatory announcements to the stock market. An LEI is a 20-character reference code that uniquely identifies a legally distinct entity that engages in a financial transaction.
All such companies that do not already have a LEI should now take steps to obtain one from the LEI service at the London Stock Exchange. There is an initial allocation cost of £115 + VAT and an annual maintenance cost of £70 + VAT. The LSE aims to turn around applications within 1-3 working days.
The LSE’s quick user guide to LEIs, How to Register for and Request an LEI, and other useful information can be found here. The LEI team can be contacted on +44 (0)20 7797 3300 or via email at firstname.lastname@example.org.
The requirement to have an LEI does not apply to companies with securities admitted to AIM or another multilateral trading facility (MTF) operated by the LSE.
In accordance with the Transparency Directive (TD), the Disclosure Guidance and Transparency Rules (DTR) require an issuer that discloses “regulated information” to file this information at the same time with the FCA. The information must be disclosed in a manner which ensures it is capable of being disseminated simultaneously to as wide a public as possible. It must generally be communicated in unedited full text and make clear that it is regulated information. In practice, issuers usually select a regulatory information service (RIS) that is a primary information provider, such as the Regulatory News Service, to disseminate their regulated information to the market (colloquially known as “sending it down the wire”), which also discharges their obligation to file it with the FCA.
Regulated information is defined in the FCA’s Transparency Rules to mean:
“all information which an issuer, or any other person who has applied for the admission of financial instruments to trading on a regulated market without the issuer’s consent, is required to disclose under:
the Transparency Directive [primarily, annual and half-yearly financial reports disclosed under DTR 4; information about major shareholdings disclosed under DTR 5; and information about general meetings, issues of new shares and the payment of dividends disclosed under DTR 6]; or
articles 17 to 19 of the Market Abuse Regulation [i.e. inside information and information about dealings in their own company’s shares by PDMRs and persons closely associated with them which, until the Market Abuse Regulation came into force on 3 July 2016, were disclosed under DTR 2 and 3 respectively]; or
the Listing Rules (LR), and DTR [primarily information about rights issues, open offers, other issues of shares, changes of directors, major transactions, related party transactions and buybacks disclosed under LR 9, 10, 11 or 12].”
Under the Transparency Directive, Member States must appoint a mechanism for the storage of regulated information. The National Storage Mechanism (NSM), operated by Morningstar plc, acts as the UK’s official appointed mechanism (OAM) for storing regulated information.
Access to regulated information via the new European Electronic Access Point
Article 21a of the TD requires the European Securities and Markets Authority (ESMA) to develop and operate a web portal, to be known as the European Electronic Access Point (EEAP), that will enable market participants and members of the public (end users) to search for regulated information stored by national OAMs. The web portal will be accessible through ESMA’s website. The EEAP must be established by 1 January 2018.
The portal will allow end users to search by:
name of issuer that published the regulated information;
home Member State of the issuer;
type of regulated information (see below), which will be classified according to a pan-European classification system.
Categories of regulated information will include:
annual financial reports;
half-yearly financial reports;
choice of home Member State;
notifications of major shareholdings, and disclosures by the issuer of the total number of voting rights in issue;
details of any acquisition or disposal of the issuer’s own shares;
changes in the rights attaching to classes of shares;
all other information that the issuer is required to disclose under the laws or regulations of its home Member State.
Search results will include a hyperlink to the webpage of the OAM website where the regulated information is stored and can be viewed.
Legal entity identifiers (LEIs)
At present, most issuers are not required to have an LEI. Although the TD does not actually require an issuer to obtain an LEI, in practice all issuers with securities admitted to trading on an EU regulated market will need to obtain an LEI in order to comply with the TD. This is because the relevant delegated regulation made under the TD requires OAMs to (i) organise regulated information by LEI and (ii) classify it into one of ten categories specified in the delegated regulation. Only an issuer itself, or someone authorised to do so on its behalf, can obtain an LEI. And only the issuer will be able to determine correctly which category of regulated information it is filing.
Under new rules in chapter 6 of the Disclosure Guidance and Transparency Rules that will come into force on 1 October 2017 an issuer will therefore be required to supply an LEI and classify regulated information according to the delegated regulation categories when it files regulated information with the FCA. The categories will be set out in a new annex to DTR 6. If more than one category applies – such as where an annual report contains inside information - all the relevant categories must be specified. In practical terms, we understand that when an issuer, or its PR adviser or agent, submits an announcement to an RIS for sending down the wire, it will have to select the relevant category or categories into which the announcement falls (e.g. from a dropdown menu), but that the category(ies) selected will not appear in the text of the announcement seen by the market.
An issuer will not need an LEI to file regulated information with the FCA before 1 October 2017. However, issuers are encouraged to obtain and use an LEI as soon as possible to help ensure that information relating to them can be found via the NSM and, when it is operational, the EEAP.
Headline categories and codes used by RISs will continue to be used
The FCA has around 100 headline codes and categories that are used for every announcement made via a RIS. These are set out in an Annex to DTR 8. Each headline code or category has a given priority assigned to it, which RISs use to help determine the order in which announcements should go out.
The FCA has decided that it is not possible to directly map the FCA headline codes and categories to the EEAP categories. When an issuer wants to make an announcement, as well as specifying its LEI and each relevant category of regulated information under the TD, the issuer will also need (as now) to assign to the announcement the most appropriate headline code or category from the list in the Annex to DTR 8. That headline category will (as now) appear in the text of the announcement seen by the market.