The FSA has censured BDO LLP for failings while acting as a sponsor during a reverse takeover in 2009. This is the first public censure of a sponsor by the FSA in relation to the Listing Rules.
In May 2009 BDO was approached by Shore Capital Group PLC to provide advice as a sponsor on its proposed merger with Puma Brandenburg Limited. Shore Capital’s shares were listed on the Official List and traded on the London Stock Exchange. BDO was made aware that the transaction might constitute a reverse takeover due to the large size of the target company. This possible classification was significant as the Listing Rules create a rebuttable presumption that an issuer’s shares will be suspended upon announcement or leak of a reverse takeover. The presumption can be rebutted "if the FSA is satisfied that there is sufficient information in the market about the proposed transaction...".
BDO did not liaise with the FSA in advance of the announcement of the transaction to ascertain whether Shore Capital’s shares should be suspended. Instead, BDO specifically agreed with Shore Capital from the outset that it would not contact the FSA until after the announcement and, in the run up to the announcement, reworked the class tests several times in an attempt to classify the transaction as a class 1 transaction.
The Listing Rules require sponsors to act with due care and skill in relation to sponsor services and to deal with the FSA in a open and co-operative manner. The FSA concluded that BDO’s conduct in relation to the transaction did not satisfy these requirements and issued a public censure of BDO. It is for the FSA and not the sponsor to decide whether a suspension is necessary or not. In this case, the FSA decided that a suspension of Shore Capital's shares was not required. However, this did not effect the fact that BDO had acted in breach of LR 8.3.3(2) (due care and skill) and LR 8.3.5 (dealing with the FSA in an open way).