In the first case of its kind, the Financial Conduct Authority (FCA) issued a fine of £231,000 against a listed company sponsor. The fine was imposed on Execution Noble & Company Limited (ENCL) for breaches of Listing Rule (LR) 8.
As ENCL had not been engaged in high levels of sponsor activity, it had been subject to enhanced supervision by the FCA in its capacity as the UK Listing Authority (UKLA) between September 2011 and June 2013. During discussions with the UKLA, ENCL reported that it had three key individuals responsible for sponsor compliance and a further twelve members assisting, which comprised their sponsor team. Between June and September 2013, the three key individuals and seven other members of the sponsor team resigned.
ENCL notified the FCA following these resignations in order to update the register of approved persons, however it failed to notify the FCA separately in its capacity as the UKLA for the purposes of the Listing Rules. ENCL continued to market itself as a competent sponsor and acted as sponsor on one occasion after the staff had departed.
The UKLA sought clarification from ENCL on their staffing situation following reports in November 2013 claiming that an individual responsible for leading and executing sponsor services had joined another firm. It was only then made aware of this and the other departures. ENCL’s sponsor approval was formally suspended in December 2013 at its request.
The FCA found that ENCL had failed to act in an "open and co-operative manner" by failing to notify the UKLA, thereby breaching LR 8.3.5R. The FCA also found that ENCL's failure to notify was a breach of LR 8.7.8R(1)(a), as the UKLA could not assess whether ENCL continued to satisfy the criteria for approval, as set out in LR 8.6.5R. In light of these breaches, the FCA imposed a fine of £231,000 on ENCL.
Georgina Philippou, acting FCA director of Enforcement & Market Oversight said:
'Sponsors perform a critical role in maintaining the integrity of the premium listed equity market by providing expert guidance on the listing rules and key regulatory assurances to the FCA. It is vital that the regulator, issuers and investors have confidence in sponsors; and we rely on them having an open and co-operative relationship with us. All sponsors should take note of the consequences if they fail to notify us of material information on time.'
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