The 20 second summary
In Primary Market Bulletin No.8, the FCA has published additional guidance on the practical aspects of new powers in relation to sponsors and the new sponsor powers; dealing with the FCA in open and co-operative manner; and reverse takeovers. The FCA is also consulting on new guidance on the 20 business day rule for cancellations/transfers; novel/complex share buyback structures; the disclosure of lock-up agreements; and related party transactions by closed-ended investment funds.
Comments on the proposed guidance should reach the FCA by 1 October 2014. Separately the FCA intends to publish its response to its consultation on sponsor competency, together with the final rules in the last quarter of 2014.
Additional powers to supervise sponsors (PN 910.1 and TN 712.1)
These new Notes explain the FCA’s power to impose restrictions or limitations on sponsor services; suspend a sponsor’s approval at a sponsor’s request and suspend or impose restrictions or limitations on sponsor services to further the FCA’s operational objectives (see our earlier ebrief for further details). No other substantive changes have been made.
Listing Principle 2 – Dealing with the FCA in an open and co-operative manner (TN 209.1)
This new Technical Note sets out a non-exhaustive list of factors which issuers should take into account when considering whether to contact the FCA. For example, does the FCA have a regulatory role to play and if the transaction is time critical, the FCA should be contacted well in advance.
Sponsor firms – on-going requirements during reorganisation (PN 909.2)
This Procedural Note has been amended to include new guidance on the sponsor’s ability to request a suspension of its approval during a re-organisation where the sponsor is unable to comply with the approval criteria on a short-term basis.
Sponsors – uncertain market conditions (TN 705.2) and Sponsor transactions – adequacy of resourcing (TN 709.2)
Amendments to these Notes reflect the additional powers of the FCA to supervise and discipline sponsors, referred to in TN 712.1 above.
Reverse Takeovers (TN 306.2)
This updated Note reflects the need for issuers to engage early with the FCA on reverse takeovers, in accordance with Listing Principle 2.
Proposed new guidance
The FCA is consulting on new guidance, including:
- a new Technical Note on requests to waive the 20 business day rule for cancellations or transfers – the FCA are reluctant to modify or dispense with this rule on the basis that it allows shareholders time to raise any objections to a proposed course of action. The fact that a transaction is urgent will not be a compelling argument for waiver and the FCA will only consider this in limited circumstances;
- a new Technical Note providing greater clarity and certainty when novel/complex approaches are used by premium listed issuers when structuring share buybacks;
- a new Note on related party transactions by closed-ended investment funds – where a closed-ended investment fund is proposing to issue further shares and changes are made to the investment management agreement which could or are for the benefit of the investment manager, these changes would fall under the related party transaction rules requiring shareholder approval. This will not be the case where the agreement is amended to cover new money on the same basis as existing funds;
- a new Technical Note on the disclosure of lock-up agreements – to ensure compliance with DTR 1.3.3R and 1.3.4R (misleading information not to be published) the FCA expect issuers to consider whether certain terms or conditions of lock-up agreements (for example where a party can, with the consent of the broker, modify, waive or cancel the agreement before the expiration of the term) should be disclosed when reference to these agreements is announced or published;
- a new Technical Note on pro forma financial information – to reflect the revised guidance in ESMA’s Q&As on prospectuses, this proposed Note provides illustrative examples of pro forma P&L together with guidance on the definition of pro forma financial information; and
- miscellaneous amendments to existing Notes to reflect the amendments to the Listing Principles, the introduction of the Premium Listing Principles and the new sponsor records management rules which came into force in December 2012.