Locations
Market reCap
- Inside the wall
- FSA consultation on PDMR transactions – issues for brokers
- Significant changes to the listing regime
- The end of "no names" calls to the UKLA? And the first edition of Primary Market Bulletin
- AIM Regulation and directors participating in a secondary fundraising
- QCA remuneration committee guide for smaller quoted companies
- Kay Review of UK equity markets – interim report published
Professor John Kay published his interim report in February 2012, having been commissioned by the government to conduct a review of the incentives, motivations and timescales of participants in the UK equity markets.
The interim report was divided into 5 main sections: the company and the board, measurement and reporting, market practice, asset managers and intermediaries. The issues raised, and which may be explored further in the final report, include:
(i) in relation to takeovers, whether the target's directors could have increased discretion to recommend rejection of an unsuitable bid (even if it is the highest), and potential differential rights for shareholders favouring those with long term holdings;
(ii) the perception from some large institutions that the quality of new listings was low, and good companies were being deterred by high costs of issuance and an increasing regulatory burden;
(iii) whether the frequency of company reporting is excessive and leads to an unwelcome short term approach at the expense of the long term growth and development of business;
(iv) commonly used metrics (in particular, earnings per share) not being sufficiently linked to long term value creation; and
(v) the greater imposition of fiduciary duties within the investment chain, and in particular the avoidance of conflicts of interest.
Other matters discussed are the role of private equity, a financial transaction tax, mark to market accounting for pension liabilities, and the proliferation of intermediaries. It was noted that certain matters, such as the difference in tax treatment between equity and debt, was beyond the scope of the review.
The final report is due to be delivered to the government in July 2012 following further submissions of evidence. It is anticipated that this will contain recommendations which will need to be considered by appropriate bodies, including HM Treasury regarding tax matters. This may affect the ultimate practical impact of the report – stewardship codes and other non-legislative sources may be amended relatively easily, but it is unlikely that directors' statutory duties will be rewritten in the near future.
A copy of the interim report can be accessed here.
Daniel Hooke is a Senior Associate (PSL) in the Corporate Group of Field Fisher Waterhouse LLP in London.