Planning guidelines and targets for renewable energy in Australian markets
Victoria and South Australia are tightening their guidelines and planning policies for renewable energy facilities.
Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On March 28, 2017 the Financial Conduct Authority (FCA) published a Final Notice setting out its reasons for requiring both Tesco PLC and Tesco Stores Limited to pay compensation (by way of restitution) to certain shareholders and bond holders in accordance with the arrangements set out in Annex 2 to the Final Notice.
On August 29, 2014 Tesco PLC published a trading update, stating that it expected trading profits for the six months ending August 23, 2014 to be in the region of £1.1 billion (August Statement). The Tesco PLC board relied on incorrect information from Tesco Stores Limited in issuing the August Statement. Tesco PLC published a further trading update on September 22, 2014 (September Statement) in which it announced an over-statement of expected profits for the half year. Information in the August Statement gave a false or misleading impression as to certain Tesco PLC shares and group bonds, and this constituted engagement in market abuse on the part of Tesco PLC and Tesco Stores Limited contrary to section 118(7) Financial Services and Markets Act 1986 (FSMA).
The FCA notes in the Final Statement that there is no suggestion any Tesco board member knew, or could reasonably be expected to have known, that the information in the August Statement was false or misleading. However, the FCA has found that there was knowledge at a sufficiently high level but below the level of the Tesco PLC board as to the false or misleading nature of the August Statement for that knowledge to constitute the knowledge of Tesco PLC, within the specific context of, and for the purpose of, market abuse. As a result of the market abuse, a false market was created in relation to certain shares and group bonds which substantially came to an end when the September Statement was published. As a result, the FCA has exercised its power under section 385(5) FMSA to require Tesco PLC and Tesco Stores Limited to pay restitution to investors who were net cash purchasers of Tesco shares between August 29 and September 19, 2014 or net purchasers of certain Tesco listed bonds between those dates and suffered loss, in accordance with the arrangements set out in Annex 2 to the Final Notice. Losses mitigated by hedging are not covered by the compensation arrangements.
The FCA notes that Tesco Stores Limited has entered into a deferred prosecution agreement with the Serious Fraud Office and that it will pay a substantial penalty pursuant to that agreement. It notes that both Tesco PLC and Tesco Stores Limited have co-operated in an exemplary manner with the FCA and taken steps to ensure similar misconduct will not occur in future and so the FCA has decided not to impose a further financial penalty on either Tesco Stores Limited or Tesco PLC. In terms of co-operation, the Final Notice states that both companies were proactive in offering information to the FCA, responded promptly and constructively to requests made of them, refrained (at the FCA’s request) from interviewing witnesses or taking statements and disclosed voluntarily material which appeared to them to be significant to the FCA’s enquiries.
Annex 2 to the Final Notice sets out the arrangements for the restitution scheme. These include the following:
Annex 2 also includes the form of release which eligible claimants who wish to accept an offer will need to sign and return to the Fund Administrator as a condition of receiving a compensation payment.
On March 28, 2017 the Serious Fraud Office (SFO) confirmed that it had reached an agreement with Tesco Stores Limited which, if approved by the Crown Court at a public hearing on April 10, 2017, will result in a Deferred Prosecution Agreement becoming effective.
The SFO has also confirmed that, if approved, the Deferred Prosecution Agreement will result in Tesco Stores Ltd paying both a financial penalty of £128,992,500 and the SFO’s full costs.
In March 2017, the Institute of Chartered Secretaries and Administrators (ICSA) published a revised guidance note on the terms of reference for audit committees. It reflects the changes to the UK Corporate Governance Code (Code) published in April 2016 and to the Guidance on Audit Committees published by the Financial Reporting Council (FRC) in April 2016.
Key changes to the model terms of reference include the following:
On March 30, 2017 the Financial Conduct Authority (FCA) published its Primary Market Bulletin No. 17. The Bulletin covers several different topics.
Feedback on the FCA’s call for views on sponsor conflicts
The FCA notes that it has recently completed discussions with stakeholders focused on the rules and guidance on sponsor conflicts of interest in Chapter 8 of the Listing Rules. In 2014 the FCA published a Call for Views (CFV) in CP14/21 ‘Feedback and Policy Statement on CP14/02, consultation on joint sponsors and call for views on sponsor conflicts’. In this Bulletin the FCA highlights the key themes which emerged from the responses to the CFV and its discussions with stakeholders more generally, and sets out its proposed response to them. The FCA is consulting on a new guidance note – Technical Note (TN) 701.3 – which will replace the existing guidance on sponsor conflicts in TN 701.2.
FCA’s proposed new guidance on sponsor conflicts
The FCA is proposing to provide guidance in TN 701.3 which modifies and updates existing guidance in TN 701.2. Its proposals are summarised below:
UK Financial Reporting Standards (FRS) 102
FRS 102, which took effect in 2015, exempts investment funds that meet certain conditions from preparing statements of cash flows. However, Annex 1 Part 20.1 of the Prospectus Directive requires that audited financial information in a prospectus prepared according to national accounting standards must include a cash flow statement. The FCA is considering the interaction of these requirements. In the meantime, should specific guidance on this matter be required, a written request for guidance should be submitted detailing the facts of the particular case, in accordance with Chapter 9 of the Supervision manual (SUP).
New TR-1 form
On October 22, 2015, the European Securities and Markets Authority (ESMA) published a new standard form for the notification of major holdings. On implementation of the Transparency Directive Amending Directive (2013/50/EU) (TDAD), Policy Statement PS15/26 (Implementation of the Transparency Directive Amending Directive (2013/50/EU) and other Disclosure Rule and Transparency Rule changes) referenced this new standard form and the FCA advised it would implement this and discontinue use of the current TR-1 form in the future. The FCA now proposes that the new TR-1 form will come into force on June 30, 2017 which will give vote holders time to make any necessary amendments to their current notification procedures.
Member States have discretion to make changes to the ESMA standard notification form as they see appropriate. In the UK, the FCA has decided to make some amendments to the content of the form as follows:
The FCA encourages issuers to send the TR-1 form to it in Microsoft Word format, as opposed to readable PDF.
Legal Entity Identifiers (LEIs)
In Chapter 6 of Quarterly Consultation Paper No. 15 (QCP) published in December 2016, the FCA consulted on proposed changes to the Disclosure Guidance and Transparency Rules sourcebook following the adoption of the RTS by the European Commission and its publication in the Official Journal. Those proposed changes consisted of adding new rules in DTR 6.2 under the heading ‘Filing of information with FCA’ to require issuers to supply a legal entity identifier (LEI) and classify regulated information according to the RTS Annex when they file regulated information with the FCA.
The consultation period for this chapter of the QCP is now closed and the FCA is currently analysing the feedback received with the aim of publishing feedback in a Handbook Notice shortly. However, the FCA encourages issuers to consider what arrangements they will need to have in place so that, if and when the rule comes into force, they are able to comply, and even though there is no obligation for issuers to provide LEIs or classify regulated information yet, the FCA encourages issuers to do so as it will ensure that regulated information which they file will be searchable through the European electronic access point when it becomes operational.
Consultation feedback and changes to the Knowledge Base
The FCA is consulting on the addition of a new procedural note on the procedural mechanics of replacing a debt issuer on the Official List through a substitution and on amendments to the following two existing technical notes:
Confirmed changes to the Knowledge Base include the following:
New technical notes
Amended technical and procedural notes
Deleted technical notes
On March 30, 2017 David Davis, the Secretary of State for Exiting the European Union, presented the Government's White Paper on legislating for the UK's withdrawal from the EU to Parliament. The White Paper follows the notification given by the Prime Minister on March 29, 2017 of the UK's intention to leave the EU and the triggering of the procedure under Article 50 of the Treaty on European Union.
The White Paper sets out the Government’s intended approach to the Great Repeal Bill. This includes:
The White Paper also sets out the Government’s strategy for interaction with the devolved administrations, Crown dependencies and overseas territories.
On March 28, 2017 the Department for Business, Energy and Industrial Strategy (BEIS) announced that Business Minister Margot James has written to the chief executives of all FTSE 350 companies urging them to improve diversity and inclusion in the workplace, and referring them to the key recommendations made in the McGregor-Smith Review of February 2017.
Companies are encouraged to:
On March 16, 2017 the Financial Reporting Lab published a lab project call for listed companies, investors and analysts to participate in a project on risk and viability reporting. This project follows the publication of the Lab report on business model reporting which was published in October 2016. The new report will explore how companies can develop effective principal risk reporting and viability statement reporting to meet the needs of investors.
While the scope of the project may evolve to explore the needs of companies and investors identified during the project, it is expected to examine characteristics including:
The Lab is requesting that companies, investors and analysts indicate their interest in participating by April 21, 2017 as the project will commence in May 2017. It is hoped that the results of the project will be published in time to assist those preparing December 2017 year-end annual reports.
Hacking, corporate espionage and data breaches are on the rise around the globe.