FCA: Quarterly Consultation No. 26
On December 6, 2019, the Financial Conduct Authority (FCA) published the 26th edition of its quarterly consultation paper CP19/33 (Consultation Paper) which consults on various proposed minor amendments to the FCA Handbook (Handbook).
In the Consultation Paper, the FCA proposes and is seeking views on the following:
- Chapter 2 - Amendments to the Handbook to clarify that the Financial Services Compensation Scheme (FSCS) can only consider one protected claim against either an appointed representative (AR) or a principal, up to the relevant limits set out in COMP 10.2.3R. It also proposes to clarify that, in line with the relevant provisions in the Financial Services and Markets Act 2000 (FSMA), FSCS claims can be made by an eligible claimant against a relevant person who has acted outside the scope of its permissions, including an AR acting outside the scope of its agreement with the principal.
- Chapter 3 - Amendments to Listing Rule (LR) 13, Annex 1 regarding the documents on display required for a class 1 transaction to clarify that the sale and purchase agreement (or equivalent document) does not need to be made available online. Instead, a hard copy can be made available for inspection and the issuer would need to state where it is located. This reverts to the practice prior to the amendments to the LR reflecting the new Prospectus Regulation in July 2019. The FCA comments that it did not intend to require the SPA to be available online when updating the rules and are therefore proposing to reverse the changes made in July.
- Chapter 4 - Amendment to the LR to require issuers with securities listed in the UK to publish, and keep publicly available, information on the rights attached to the securities. These proposals would require issuers with listed securities to keep publicly available in the National Storage Mechanism (NSM) either the securities' approved prospectus, a document with the securities' terms and conditions or a description of the securities' rights and how to exercise those rights. This information is to be available while the securities are admitted to listing.
- Chapter 5 - Minor amendments to the FCA Handbook to reflect changes made by the Financial Guidance and Claims Act.
- Chapter 6 - Minor changes to the Perimeter Guidance Manual (PERG) 15.3 on payment accounts.
- Chapter 7 - Changes to regulatory reporting requirements.
- Chapter 8 - Brexit-related changes to the FCA Handbook and binding technical standards following the extension of Article 50. The proposals include consequential changes to the Disclosure Rules and Transparency Rules sourcebook 4.1.14R to implement Article 4(7) of the Transparency Directive to reflect the UK version of the European Single Electronic Format. These changes will only come into effect if the UK leaves the EU without an implementation period.
The FCA requests comments on the proposed amendments set out in chapters 3, 7 and 8 of the Consultation Paper by January 6, 2020 and February 6, 2020 for chapters 2, 4, 5 and 6.
(FCA: Quarterly Consultation No 26, 06.12.19)
QCA: AIM Good Governance Review 2019/20
On December 10, 2019, the Quoted Companies Alliance (QCA) and UHY Hacker Young, published their annual AIM Good Governance Review 2019/20 (Review).
The Review focuses on five key areas, namely:
- The strategic report
- Stakeholder engagement
- Board dynamics
- Board expertise
- Succession planning
It notes that the most significant change to corporate governance reporting for AIM companies in recent years was the introduction in 2018 of a requirement for AIM companies to state which corporate governance code they have chosen to adopt, how they comply with that code, and an explanation of the reasons for any departures from it. The Review notes that this has prompted companies to go through a process of review and reflection and has already resulted in a substantial increase in the amount of information disclosed to the market.
(QCA: AIM Good Governance Review 2019/20, 10.12.19)
Private Equity Reporting Group: Twelfth report on conformity with Walker Guidelines and updated report on good practice reporting by portfolio companies published
On December 6, 2019, the Private Equity Reporting Group (PERG) published its published its 12th annual report on conformity with the Guidelines for Disclosure and Transparency in Private Equity (Walker Guidelines) (12th Report) and an updated version of its guidance on good practice reporting by private equity portfolio companies under the Walker Guidelines (Good Practice Guidance). The Walker Guidelines provide a framework for the private equity industry to address the increased scrutiny of business and explain its approach to employees and other stakeholders on matters including environmental matters and social issues.
The 12th Report covers 55 portfolio companies and the 47 firms that back them.
Key findings include:
- Of the 17 portfolio companies reviewed in the sample all complied with the disclosure requirements in the annual report, however, only 53 per cent prepared disclosures to at least a good standard and this is a significant fall compared to 73 per cent of 15 portfolio companies in 2018. PERG notes that these findings demonstrate that private equity firms must spend further time with their portfolio companies to ensure knowledge of the Walker Guidelines is embedded in the annual reporting cycle.
- 80 per cent of portfolio companies have published an annual report in a timely manner on their website and 68 per cent of portfolio companies have published a mid-year update in a timely manner on their website. Again, these levels are down from 2018.
- 7 per cent of portfolio companies have not complied with any of the three components of the Walker Guidelines that apply to them this year and these companies are backed by non-BVCA members.
- All British Private Equity and Venture Capital Association (BVCA) members have published certain disclosures on their own websites to communicate information about themselves, their portfolio companies and their investors as required by the Walker Guidelines.
PERG states that during 2020 it plans to monitor the publication of annual reports and mid-year updates to ensure these are made on a timely basis as improvement is required. In addition, it plans to monitor the impact of the changing narrative reporting landscape in the UK, including the reporting requirements on directors’ duties, engagement with stakeholders and corporate governance arrangements. It also intends to monitor narrative reporting in the UK and the review of the EU Non-Financial Reporting Directive.
The Good Practice Guidance remains substantively unchanged from the December 2018 version, although the examples from practice have been updated. In relation to the preparation of annual reports, the Good Practice Guidance highlights that gender diversity requirements continue to be an area of challenge as portfolio companies do not take the opportunity to discuss their work to address diversity in the workplace, at either the gender level or in a wider context. The Good Practice Guidance also reiterates the importance of clear reporting on a company’s business model and highlights that such a report should focus on the critical elements of the business and there should be an inherent connection between a company’s purpose and its business model with both being explicit about the stakeholders that are key for the business.
(Private Equity Reporting Group: Twelfth report, 06.12.19)
(Private Equity Reporting Group: updated report on good practice reporting by portfolio companies, 06.12.19)
European Commission: Communication on the European Green Deal
On December 11, 2019 the European Commission (Commission) published a Communication on the European Green Deal. It confirms the Commission’s commitment to tackling climate change and environmental-related challenges and sets out an initial roadmap of the key policies and measures needed to achieve the European Green Deal
(European Commission: Communication on the European Green Deal, 11.12.19)