Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Global | Publication | October 6, 2017
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On September 29, 2017 the European Securities and Markets Authority published another updated version of its Q&As on the Market Abuse Regulation (MAR). ESMA has added a second question to its section on the disclosure of inside information. It specifically addresses how an issuer should deal with a situation where it has delayed a disclosure of inside information in accordance with Article 17(4) of MAR but subsequently the information loses the element of price-sensitivity and accordingly its inside nature.
While Article 17(1) of MAR states that issuers must inform the public as soon as possible of inside information that directly concerns that issuer, Article 17(4) allows issuers to delay the disclosure of inside information to the public provided that certain conditions are met.
ESMA states that:
On October 5, 2017 the London Stock Exchange (LSE) published AD 16, a Disciplinary Notice announcing a consent order agreed between the LSE and Management Resource Solutions plc (the Company) for a public censure and fine of £125,000 for breaches by the Company of the AIM Rules.
The disciplinary action relates to a proposed acquisition by the Company of a Dutch company which was notified on March 5, 2015. At the time of the notification, the Company disclosed that it had entered into a debt facility with a finance provider to fund the acquisition. By March 19, 2015, certain of the directors had received further information which gave rise to real concerns that the monies might not be forthcoming from the finance provider and they could not contact the provider to drawdown the funding. The finance director of the Company was not informed of this and while the nominated adviser was informed of a possible delay due to the release of existing security, the nominated adviser was not informed of the difficulties in the drawdown of the funding. However, the directors with the knowledge did discuss those concerns with some of the Company’s other advisers in Australia.
On March 27, 2015, the Company issued a notification that the final condition for completion of the acquisition would soon be met but the Company failed to caveat the information in its notification with details of the risk to completion created by the uncertainty in respect of the financing.
The LSE considers that it was misleading to issue such a definitive notification on March 27, 2015 at a time when the Company knew that the funding was uncertain and it also considers it unacceptable for the nominated adviser not to have been informed of this, or for the Company not to have sought its advice on the AIM Rule implications. When the finance director became aware of the issues he informed the nominated adviser and the Company’s AIM securities were suspended on April 8, 2015 pending clarification of the funding position. The funding was not provided and the acquisition did not proceed. When trading was restored on June 15, 2015, the Company’s share price fell over 26 per cent.
The Company was found to have breached the following AIM Rules:
The LSE notes in the Disciplinary Notice that, as far as Rule 10 is concerned, companies must ensure that notifications provide a clear understanding of the matters being disclosed and are properly caveated where necessary. The LSE will bring to account companies that fail to meet the standards of disclosure required on AIM where there is actionable evidence. The censure also demonstrates the importance of keeping the nominated adviser informed of developments and of the need to seek advice. Discussing matters with other advisers is not a substitute for an AIM company’s obligations to seek advice from its nominated adviser and to keep its nominated adviser informed. In addition the LSE reminds AIM companies that if they are under investigation by AIM Regulation, they are required to use due skill and care to ensure that information provided to the LSE is correct, complete and not misleading. Failure to do so is considered to be a serious matter as it has the potential to interfere with the LSE’s work in bringing action where appropriate.
On October 4, 2017 the Financial Reporting Lab of the Financial Reporting Council published a report examining how companies have responded, in the second year of reporting, to suggestions for enhanced disclosure which were made in the Lab’s Disclosure of dividends – policy and practice report published in November 2015.
In the summer of 2016 the Financial Reporting Lab undertook a review of FTSE 350 dividend disclosures to assess how early practice had developed following the November 2015 report. The results of that review were published in a report published in December 2016.
For the purposes of this review, the Lab reviewed all the FTSE 350 annual reports published in 2016 that were also in the FTSE 350 at the end of 2015 to assess the extent to which disclosure practice had changed. It identified developments in how companies described their dividend policies, the risks to dividend payments and the factors considered in setting the dividend policy. 58 per cent of FTSE 100 companies now disclose information about distributable profits or distributable reserves, an increase from 40 per cent in 2015. However, progress in the FTSE 250 has been less significant, with only 30 per cent of companies making some disclosure on distributable profits or distributable reserves.
The study includes examples of practice in the following areas:
The Financial Reporting Lab believes that there are a number of areas where improvements could still be made, or where there are opportunities to take disclosures further. Key areas include the following:
On October 4, 2017, CORE, a UK civil society coalition on corporate accountability, published a report which provides a snapshot of company slavery and human trafficking statements published in compliance with section 54 Modern Slavery Act 2015. The report looks at 50 companies’ statements. 25 companies source raw materials known to be linked to labour exploitation (cocoa from West Africa, mined gold, mica from India, palm oil from Indonesia and tea from Assam) and 25 operate in sectors known to be at risk of modern slavery (clothing and footwear, hotels, construction, Premier League football and service outsourcing).
Key findings include the following:
However, the report also notes examples of good practice reporting:
CORE concludes that overall compliance with the reporting requirement in the Modern Slavery Act is low with an estimated 9,000-14,000 companies still to publish. In relation to the published statements examined, in general, many are not compliant with the basic requirements of the legislation and the majority do not address in substantive detail the six topic areas listed in the Modern Slavery Act. Many companies are not reporting on human rights due diligence and are not considering how their own business models can create risks of severe labour rights abuses.
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Publication
The EU Foreign Subsidies Regulation, or FSR, is intended to prevent or remedy distortions of the EU internal market caused by “foreign” – meaning non-EU – subsidies benefitting companies active in the EU.
Publication
The English High Court has given its judgment in the legal battle between FW Aviation (FWA) and VietJet Aviation Joint Stock Company (VietJet). This case revolved around the enforcement of leasing agreements for four Airbus aircraft and the alleged interference by VietJet in the aircraft’s repossession in Vietnam.
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