Sponsor competence, joint sponsors and sponsor conflicts
Market reCap November 2014 edition
- UK Corporate Governance Code update: emphasis on longer term
- Sponsor competence, joint sponsors and sponsor conflicts
- Takeover Code: consultation on post-offer undertakings and intention statements
- Insider dealers pay the price for print room dealing
- QCA Audit Committee Guide for Small and Mid-Size Quoted Companies
The Financial Conduct Authority (FCA) has finalised changes to the Listing Rules relating to sponsor competence, with the new rules taking effect on 1 February 2015. The FCA is now consulting on the regime for joint sponsors and whether current Listing Rules and guidance on sponsor conflicts should be amended.
We reported on the FCA's proposals relating to sponsor competence in an earlier article. These proposals are being adopted, with some amendment.
The principal change to the original proposals is that sponsors will not be required to adopt a competence framework to assess the competence of their staff. However, the five proposed competency sets will be adopted, and firms will be required to have effective systems and controls in place to ensure that they comply with the competency requirements.
The annual notification form is being amended and sponsors will be expected to set out on the form how they meet each competency set, detailing the relevant skills, knowledge and experience within the firm. The new form will be available in February 2015 and should be used from January 2016. Similar amendments are being made to the new applicant form which should be used for new applications after 1 February 2015.
In relation to key contacts, the proposed requirement for a key contact to be proficient in the FCA's procedural requirements and processes has been dropped, as other employees may have this knowledge. Key contacts will be required to understand a sponsor's regulatory obligations under LR 8 and have technical knowledge of the rules, guidance and publications of the European Securities and Markets Authority relating to the sponsor service being provided.
The FCA has revised its proposed Technical Notes on sponsor competence and, subject to responses received, will publish these to its Knowledge Base on 1 February 2015.
The FCA is retaining the ability for issuers to appoint joint sponsors and is now consulting on the application of the sponsor regime in these circumstances.
It proposes to amend LR 8.5.3R so that the requirement for only one sponsor to have contact with the FCA will only apply in relation to administrative matters, such as setting up conference calls and submitting draft documents. It will therefore be implicit that all appointed sponsors will be able to participate in calls with the FCA on substantive matters. The FCA is inviting comments on a proposed new Technical Note: "Sponsors: Joint sponsors - communications with the FCA".
A new LR 8.3.15G is proposed, to the effect that joint sponsors are expected to co-operate with each other in relation to the sponsor service, including by establishing arrangements for the sharing of information as appropriate.
The FCA is inviting comments on whether the current regime on sponsor conflicts remains fit for purpose and whether any enhancements are desirable, in particular whether:
- sponsors / integrated banks should be required to disclose their transaction fees;
- relationships between sponsors / integrated banks, and any conflicts and how they are managed, should be disclosed;
- the FCA should enhance its rules and guidance on the analysis expected of sponsors when assessing their ability to act, for example using the accountancy profession's concept of "threats and safeguards"; and
- additional guidance is required on the factors the FCA should take into account when deciding whether to intervene on the basis that, despite a sponsor having arrangements in place to manage a conflict, there is an insurmountable perception of conflict.
Responses to the consultation on joint sponsors and sponsor conflicts should be sent to the FCA by 30 December 2014.
Jonathan Brooks is a Partner in Fieldfisher's Corporate Group in London