Proposed amendments to the Listing Rules, Prospectus Rules and the Disclosure and Transparency Rules

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Summary: The FSA has published a consultation paper with amendments intended to reflect changes in the market or to provide further clarification.

Existing guidance in the UKLA Technical Notes will be incorporated into the Listing Rules. Proposals include:

  • Reverse takeovers: the regime will be widened so that it applies to all types of issuers (ie. including those with standard listings) and the reverse takeover exemption will be narrowed so that it only applies to listed issuers acquiring another listed issuer that is listed within the same listing category (this is to avoid use of the reverse takeover regime as a ‘back door’ route to obtain a listing);
  • Sponsors: clarification of when a sponsor is required to be appointed (eg. in all circumstances when a sponsor is required to provide a submission, opinion or confirmation to the UKLA (eg. severe financial difficulty letters), and in other situations when a company with a premium listing is obliged to obtain a sponsor’s guidance) and the remit of the sponsor service (eg. the definition of sponsor services will include all communications with the FSA in connection with this service to ensure that the Principles for Sponsors extend to all communications); clarification on the standard of care in relation to sponsor communications with the FSA (eg a sponsor must take all reasonable steps to ensure that communications to the FSA are accurate and complete in all material respects).  The FSA will have a new ability to request explanations or confirmations in connection with a sponsor service; and a new Principle for sponsors requiring them to act with honesty and integrity;
  • Transactions: removal of references to ‘revenue nature’ in LR10 as it is no longer determinative of whether a transaction is within the ordinary course of business; dispensation of the notification requirements for a Class 3 transaction; renaming and amending the definition of break fee to clarify that it applies to arrangements where there is no independent substantive commercial rationale for the arrangement (ie. an element of ‘money for nothing’); and introducing supplementary circulars if there is a significant change or new matter;
  • Financial information: clarification of the track record requirements in LR6; and
  • Externally managed companies (special purpose acquisition companies (SPACs) incorporated to acquire, run and transform target businesses to create value and which outsource significant management functions to offshore advisory firms): amendments to the Prospectus Rules and the DTRs to ensure that the advisory firms fall within a number of the key controls and protections for shareholders within the regimes eg. responsibility for any prospectus published and the requirements of DTR 3 (share dealing by persons discharging managerial responsibilities) and new rules to prevent such companies having a premium listing in the future.

The consultation is also seeking more general feedback on what other changes are necessary to the Listing Rules to provide additional protection to investors.

The consultation closes on 26 April.  The FSA hopes to publish a policy statement in the summer on the points raised in the bullets above, with implementation shortly afterwards.  Subject to responses on the broader issue of investor protection and the adequacy of the current structure, the FSA will publish a discussion paper later in the year.

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