On 28 June 2007 the Financial Services Authority ("FSA"), in its capacity as the UK Listing Authority, wrote to Chief Financial Officers and Finance Directors of smaller cap listed companies concerning ongoing financial reporting processes. The letter was intended to remind CFOs and FDs, who often have a key role in their company's financial reporting processes, of the ongoing financial reporting obligations contained in the Listing Rules and/or the Disclosure and Transparency Rules ("DTRs").
Companies subject to the Listing Rules are required, under LR 7, to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable them to comply with their obligations, which include the timely and accurate disclosure of information to the market under the Listing Rules and DTRs. The FSA sets out some non-exhaustive factors which they may take into account when considering whether companies are complying with the identification and escalation processes expected of a listed company (as set out in LR 7). These include:
- whether both identification and escalation processes are adequate to ensure timely and accurate disclosure (including ensuring that any delay in the disclosure of inside information to the market is kept to a minimum); and
- the extent to which any processes may be subject to unchecked discretionary intervention by individuals (which may undermine the integrity of such processes). The FSA states that the disclosure of price sensitive financial information outside the normal reporting cycle should not undermine a company's identification and escalation processes.
The FSA also made clear that companies' reporting systems should be able to cope with the accelerated reporting timetables implemented by the DTRs.
The letter also included a reminder to companies of their obligations to keep control over access to inside information and their disclosure requirements in relation to, and restrictions on, dealings undertaken by persons discharging managerial responsibilities.
The letter can be viewed here.