Primary Market Bulletin No.8
Market reCap September 2014 edition
- AIM Notice 39 – update on directors participating in a fundraising
- Investor guidelines on share capital management
- Investor guidelines on transactions
- UKLA and AIM require sanctions confirmation
- Primary Market Bulletin No.8
- Board appointments and equality law
- The end of quarterly reporting requirements
- Proposed changes to the Takeover Code
- Engagement letters
- "Blocking" a company's shares: How to respond to a notice under s 793 Companies Act 2006
On 6 August 2014, the Financial Conduct Authority (FCA) published its eighth Primary Market Bulletin confirming changes to guidance in its Knowledge Base and consulting on further guidance. Responses to the consultation are requested by 1 October 2014.
The FCA has confirmed that it is adding a new technical note relating to its additional powers to supervise and discipline sponsors (UKLA/TN/712.1) and a new procedural note relating to its additional powers to supervise sponsors (UKLA/PN/910.1). We looked at the consultation on these notes in an earlier edition of Market reCap which you can read about here.
Both notes have been adopted with only minor amendments to the versions consulted on. In relation to the technical note, the FCA reports that it has received feedback from one respondent raising concerns about the need for a sponsor’s experience to be “continuously refreshed” and, in particular, the impact this requirement may have on smaller sponsors and sponsors that have been restricted or suspended. The FCA said that it will consider these comments as part of the consultation process on its consultation paper CP14/2.
Amendments to two existing technical notes and one procedural note relating to sponsors have also been finalised: Sponsors – uncertain market conditions (UKLA/TN/705.2); Sponsor transactions – adequacy of resourcing (UKLA/TN/709.2) and Sponsor firms – ongoing requirements during reorganisations (UKLA/PN/909.2).
The FCA is adding a new technical note on Listing Principle 2 – Dealing with the FCA in an open and cooperative manner (UKLA/TN/209.1), and has finalised amendments to the technical note on reverse takeovers (UKLA/TN/306.2).
Consultation on proposed new guidance
The FCA is consulting on the addition of six new technical notes.
Cancellation of listing or transfer between listing categories – requests to waive the 20 business day notice period (UKLA/TN/210.1). This draft note explains why the FCA is generally reluctant to agree to a reduction of the 20 business day notice period.
Share buybacks - novel/complex approaches and Premium Listing Principle 5 (UKLA/TN/310.1). Where a transaction would have the same effect as a buyback in substance but is not a buyback in legal form, the company should contact the FCA to discuss the application of Listing Rule 12.4. In this draft note, the FCA confirms that it would apply Listing Rule 12.4 purposively in a "substance over form" manner. The FCA also gives examples of approaches to buybacks that might offend Premium Listing Principle 5, which requires equal treatment of shareholders.
Discounted share issues and standard of disclosures in circulars (UKLA/TN/311.1). This draft note confirms that, where shareholder approval for shares to be issued at a discount of over 10% is being sought, the circular should contain clear disclosure explaining, among other things, that a discount is being sought, the quantum of the discount and the rationale behind such a large discount.
Disclosure of ‘lock-up’ agreements (UKLA/TN/522.1). In this draft note, the FCA confirms that listed companies are expected to consider disclosing terms in lock-up agreements which allow the lock-up commitment to be modified, waived or cancelled, when information regarding lock-up agreements is being announced or published.
Pro-forma financial information (UKLA/TN/633.1). The FCA notes that question 51 of ESMA's Prospectuses: Questions and Answers, which was amended with effect from 28 January 2014, has led to changes in the way that pro forma financial information is typically presented. This draft technical note addresses a number of issues that the revised approach may pose to market participants in the UK. The draft guidance also covers other issues relating to pro forma financial information.
Related party transactions by closed-ended investment funds – amendment of an existing investment management agreement to cover new money (UKLA/TN/404.1). This draft note considers the application of the related party transaction rules when an investment management agreement is amended.
Consultation on proposed amendments to existing notes
In addition to the above, the latest bulletin consults on proposed changes to a number of existing technical and procedural notes.
Substantial changes are proposed to be made to the procedural note on UKLA decision making and individual guidance processes (UKLA/PN/908.2). Previously, a person who did not agree with individual guidance they received in relation to the Listing, Prospectus and Disclosure and Transparency Rules could ask for the guidance to be reviewed by the Listing Authority Review Committee (LARC). LARC was abolished by the FCA in January 2014. The amended note reflects the abolition of LARC and provides more detailed guidance on the UKLA's decision making procedures generally.
The proposed changes to various technical notes are of a minor nature, for example reflecting changes to the Listing Rules.
The FCA also proposes to delete one technical note: Sponsors: Creation and maintenance of records (UKLA/TN/703.1), as it relates to a Listing Rule which has now been deleted. However, the FCA reminds sponsor that they are still required to maintain accessible records which are capable of demonstrating their compliance with the Listing Rules.
Julian Grant is an Associate in Fieldfisher's Corporate Group in London.