Newsletter for primary market participants
November 2020 / No. 31
About this edition
Welcome to the 31st edition of the Primary Market Bulletin (PMB).
We begin by highlighting our approach to assessing eligibility and listing applications for cannabis-related companies. Further, we provide updates on the implementation of the European Single Electronic Format, Coronavirus-related temporary policy measures on corporate reporting, and recent changes to the Prospectus Regulation.
We also remind issuers and their advisors of their continuing obligations and provide an update on our Primary Market Specialist Supervision function (formerly Sponsor Supervision).
Finally, we present two articles summarising our recent review work. One is on listed companies’ compliance with the FCA’s rules relating to corporate governance disclosures. The second article is about Delayed Disclosure of Inside Information notifications. By publishing articles on our review work here, we hope to improve the transparency of our work overseeing primary markets, in particular highlighting good practice and areas where we see room for improvement. We aim to improve standards in the markets we oversee more generally.
In the future, we hope to continue to publish similar articles on our review work in relevant primary market topics.
What's new
ESEF update
On 5 November 2020, we published PS20/14[2], which provided feedback on CP20/12. We proposed delaying the implementation of the European Single Electronic Format (ESEF) mandatory requirements in order to relieve the burden on issuers during the exceptional circumstances of the coronavirus pandemic.
As the document says, we are going ahead with our proposal to push back by one year the ESEF requirements originally scheduled to apply to financial years starting on or after 1 January 2020, specifically requirements to publish and file annual financial reports in machine-readable format and tag basic financial information in financial statements. These requirements will now only be mandatory for financial years starting on or after 1 January 2021.
However, in response to feedback, we decided not to delay implementation of the requirement to tag notes to annual financial statements. Implementation of this requirement will remain unchanged, applying to financial years starting on or after 1 January 2022.
Issuers will still be able to publish and file their financial reports in ESEF voluntarily for financial years starting on or after 1 January 2020 if they choose.
To allow issuers to submit annual reports in ESEF, we are upgrading our National Storage Mechanism facility, its online archive of filings by companies who are subject to the Transparency Directive and Listing Rules.
We currently anticipate releasing the upgrade in January 2021, ready for those issuers who do wish to file reports in ESEF on a voluntary basis. More information will be available on the ESEF pages[3] of the FCA website as the project progresses.
Prospectus Regulation – changes to the Level 2 prospectus annexes
In PMB 30 we noted that on 4 June 2020 the EU Commission had adopted two Commission delegated regulations under the Prospectus Regulation. The two regulations entered into force on 17 September 2020 following publication in the EU’s Official Journal[4] on 14 September 2020.
Delegated Regulation (EU) 2020/1273[5] amends and corrects Delegated Regulation (EU) 2019/980[6] which relates to the format, content, scrutiny and approval of prospectuses.
We have updated our Prospectus Regulation Rules cross-reference lists[7] for the amendments that have been made to Annexes 1, 3, 4, 6 to 9, 16 and 24 to 27 of Delegated Regulation (EU) 2019/980. We remind you to use the latest version of the cross-reference lists when submitting documents for FCA approval under the Prospectus Regulation.
Delegated Regulation (EU) 2020/1272[8] amends and corrects Delegated Regulation (EU) 2019/979[9] which sets out regulatory technical standards underpinning the Prospectus Regulation.
The Prospectus Regulation Rules sourcebook will be updated to reflect these amendments and corrections to Delegated Regulation (EU) 2019/980[7] and Delegated Regulation (EU) 2019/979[10].
ESMA Guidelines on disclosure requirements under the Prospectus Regulation
ESMA Guidelines not effective before the end of the Transition Period (TP)
On 15 July the European Securities and Markets Authority (ESMA) published its Final Report – ESMA Guidelines on disclosure requirements under the Prospectus Regulation[10]. In its report ESMA explained that the Guidelines would become effective two months after their publication on ESMA’s website in all the official languages of the EU.
The Guidelines had not been published in all of the EU official languages by 1 November 2020 so will not become effective before the end of the TP on 31 December 2020. This means that for prospectuses approved in the UK, issuers and their advisors should continue to have regard to the ESMA CESR recommendations after the end of the TP.
Future treatment of the ESMA Guidelines in the UK
In Brexit Policy Statement PS19/5[11] we finalised the guidance on the FCA’s approach to EU non-legislative materials post exit, as set out in our consultation paper CP18/28[12] Brexit: proposed changes to the Handbook and Binding Technical standards – first consultation. The guidance states in relation to post-exit non-legislative EU material (which includes the ESMA Guidelines):
‘The FCA may consider materials produced by the ESAs [European Supervisory Authorities] post-exit, including where pre-exit material is updated. Where we consider it appropriate to do so, we will set out our expectations as to how it should be treated.’
In line with this approach, we will consult on our approach to the guidelines on prospectus disclosure based largely on the new ESMA Guidelines in due course.
Issuers’ continuing obligations under the Market Abuse Regulation, Listing Rules and Disclosure Guidance & Transparency Rules - Dealing with enquiries from us
Our Primary Market Monitoring team within the FCA’s Market Oversight directorate monitors the market on a real-time basis to ensure its smooth operation. This includes actively monitoring regulatory information services, media, other forums and price movements. We endeavour to ensure that issuers are complying with their obligations under the Market Abuse Regulation (MAR), Listing Rules and Disclosure Guidance and Transparency Rules on an ongoing basis, and to remedy any issues as soon as possible.
When we make contact
If we see unconfirmed media speculation which could indicate a leak of inside information under MAR, market rumours and/or an unexplained significant share price movement, we may follow up. We do this by contacting the issuer or its advisors as soon as possible to discuss the issuer’s disclosure obligations. This could include asking whether the speculation is true and, if so, whether it constitutes a leak of inside information.
We may also ask the issuer to provide us with its analysis of whether it is currently in possession of inside information (as defined under article 7 of MAR) and whether it is currently delaying disclosure of inside information under article 17 of MAR. Our enquiries can occur prior to the market opening as well as during its operation and after it closes.
How we make contact
We may call the issuer directly or approach its advisors. Who we contact will depend on the nature of the issue, any previous cases we have dealt with or simply who we are able to get in touch with at that time. If we do not hold up-to-date contact details on file, our default contact will tend to be the issuer’s Company Secretary, as we deem that they are likely to be aware of any inside information considerations taken by the issuer. In all cases, we would first verify that the person we have contacted is authorised to respond to us on behalf of the issuer.
Under Listing Rule 9.2.11R, a premium listed company must ensure that at least one appropriate person is nominated by it to act as a first point of contact with the FCA in relation to the company’s compliance with the Listing Rules and Disclosure Requirements and Transparency Rules. We expect this person to be knowledgeable about the listed company the Listing Rules applicable to it and to be contactable on business days between 7am and 7pm. They should also be capable of ensuring that appropriate action is taken on a timely basis.
To update contact details for the relevant individuals, please complete this form or email [email protected].
Our expectations of issuers and their advisors
We expect issuers and their advisors to respond to our queries without delay, particularly where this relates to disclosure considerations and obligations under MAR. Where we are dealing with an issuer’s advisor, we would expect the advisor to speak to the issuer to confirm the response provided to the FCA, and put the issuer on notice that it may be required to provide information at short notice and to be prepared to receive a call directly from us if necessary.
We also expect issuers and their advisors to deal with us in an open and cooperative manner. This includes disclosing to us any information which may be relevant to the matter being considered.
We observe advisors having differing levels of involvement when an issuer is assessing whether a disclosure obligation exists. We appreciate that often legal advisors will also be involved. Where an issuer has obtained advice or guidance in relation to its disclosure obligations, the issuer or advisor should inform us.
Where a matter involves a sponsor service in relation to a premium listed company, and the advisor is therefore giving advice or guidance in its capacity as sponsor, the sponsor should have regard to its role as a sponsor (as set out in Chapter 8 of the Listing Rules). This includes LR 8.3.1R(2) which requires a sponsor to guide a premium listed company in understanding and meeting its responsibilities under the Listing Rules, Disclosure Requirements and Transparency Rules.
Where a sponsor is guiding a company on its disclosure obligations in relation to a matter that is not a sponsor service, the sponsor should be mindful of certain provisions that apply to sponsors at all times. This includes LR 8.3.5R (open and cooperative and dealing with all enquiries raised by the FCA promptly) and LR 8.6.9BG (the FCA may take into account certain guidance or advice provided by a sponsor in circumstances other than in providing sponsor services).
Interaction with other disclosure obligations
Issuers should also consider other obligations such as the City Code on Takeovers and Mergers when considering the content and timing of announcements. In some circumstances, a matter is not required to be disclosed under one set of obligations but it nonetheless triggers an obligation under MAR. Where we identify that a disclosure obligation arises under MAR and where it appears a disclosure has not been made, we will contact the issuer to discuss the matter.
Contacting us
If an issuer or its advisor wants to get in touch with us about its continuing obligations under the relevant rules and legislation, it can submit an individual guidance request. Alternatively, if it is a real-time issue regarding disclosure obligations, it can contact the Primary Market Monitoring team on the Emergency Line. The details for how to contact us through these methods are available on our website.
We would remind issuers that we are unable to advise whether an announcement may be required under MAR or comment on the content of such an announcement, as the issuer is responsible for making this determination. Similarly, to comply with MAR, where an issuer believes a disclosure obligation exists, it should make a regulatory announcement without delay and not wait to discuss it with us.
Where the matter is in connection with a sponsor service, the sponsor will need to have regard to its responsibilities under LR 8.3 when discussing matters with us in connection with the sponsor service.
Primary Market Specialist Supervision – Formerly Sponsor Supervision
The Sponsor Supervision team (SST) has changed its name to Primary Market Specialist Supervision (PMSS) to better reflect the diverse responsibilities of the team. The team maintains the list of sponsors and is responsible for the supervision of sponsor firms subject to chapter 8 of the Listing Rules. It also carries out review of sponsors’ systems and controls to comply with the Market Abuse Regulation. As well as this sponsor-related work, PMSS is responsible for supervising Primary Information Providers (PIPs) and the Proxy Advisor regime.
The PMSS team sits within the Primary Market Oversight department of the FCA, part of the Market Oversight Directorate within the wider Enforcement and Market Oversight division.
What this means for firms
We do not expect firms will need to make any material changes to their procedures due to the name change. Firms should continue to deal with their usual contacts within the team:
- for the whole team – [email protected]
- about sponsors – [email protected]
- PIPs queries – [email protected]
- proxy advisors queries – [email protected]
There is more information about Primary Market Oversight and PMSS on our website.
Consultation feedback and changes to the Knowledge Base
We are reviewing the responses to our consultation in relation to the draft Technical Note 606.1 and will provide an update in due course.
Reviews
Corporate governance disclosures by listed issuers
Read our review of corporate governance disclosures by listed issuers[13].
Delayed disclosure of inside information
Read our review of delayed disclosure of inside information[14].