UK: delayed disclosure of liquidity support - FSA consultation

The UK's Financial Services Authority has published a consultation paper in which it proposes amending the Disclosure and Transparency Rules (DTR) in order to clarify that, in a limited set of circumstances, financial institutions admitted to trading on a regulated market and in receipt of liquidity support from the Bank of England can delay disclosure of this fact.

There is unlikely to be unanimous support for this proposal, not least because of the argument that the proposal (which is clearly designed to support financial stability) undermines the transparency of the market. The FSA nevertheless states in its consultation paper that its proposal is consistent with Article 3 of the European Market Abuse Directive (2003/124/EC) which recognises certain circumstances in which delayed disclosure can be justified. These circumstances are reflected in the current version of DTR 2.5. 

For further information see:

FSA press release | FSA newsletter | FSA consultation paper | Online response form | 

UK: Photo-Me International plc fined for DTR and Listing Principle breach

The Financial Services Authority today announced the imposition of the largest fine it has imposed in respect of the failure by a listed company to disclose inside information to the market in accordance with Disclosure Rules and Transparency Rules 2.2.1R and Listing Principle 4: see here.

The fine was £ 500,000 and it was imposed on Photo-Me International plc in respect of its failure to disclose that it was no longer engaged in exclusive negotiations for a contract when the contract was re-tendered and the company was in competition with others. Photo-Me issued a statement today - see here - in which it stated that it would not be challenging the FSA's decision and reaffirmed its position that "the FSA has underestimated the real-time difficulties faced by the Company in updating the market on the possible outcome of the relevant complex contractual negotiations".

UK: contracts for difference - general disclosure regime proposed by the FSA in respect of long positions

In November 2007 the FSA published a consultation paper titled "Disclosure of Contracts for Difference", which discussed the possible market failures (inefficient price formation, distorted market for takeovers and diminished market confidence) arising from non-disclosure of Contracts for Difference (CfDs) and the regulatory options available to address those failures. In this paper the FSA noted (at para. 1.8):

Despite the growth in the market, CfDs mostly remain outside the regulatory framework governing disclosure. This framework exists primarily to provide to the public accurate, comprehensive and timely information about changes in major shareholdings in companies issuing shares. The current disclosure requirements are therefore referenced to direct and indirect control of voting rights attaching to a share".

The FSA has today published a statement explaining its position following the end of the consultation period. In this statement the FSA explains:

We have concluded that our objective of addressing the market failures the [consultation paper] identified in relation to voting rights and corporate control can best be addressed through a general disclosure regime. Therefore we have decided to implement a general disclosure regime of long CfD positions, based on Option 3 in the consultation paper, but with two significant modifications: [1] in relation to aggregation and disclosure thresholds; and [2] in relation to an exemption for CfD intermediaries".

The FSA proposes setting the disclosure threshold at 3%., which is in line with the existing requirement with regard to voting rights in listed securities found within DTR Rule 5.1.2 (part of the Vote Holder and Issuer Notification Rules (DTR 5) within the FSA Handbook). A further consultation period has begun - on the technicalities of the proposals - and the FSA plans to publish a further statement and draft rules in September. The final rules will be published in February 2009.

For further information see:
FSA press release | FSA policy statement | November 2007 consultation paper | November 2007 consultation newsletter | FSA Handbook: DTR5 | Financial Times newspaper article | Times newspaper article | 

UK: comply or explain and corporate governance statements

The Financial Services Authority has today published a policy statement in which it announces a change to the "comply or explain" statement required by listed companies with regard to their compliance with the Combined Code on Corporate Governance. The FSA is modifying Listing Rule 9.8.6R(5) so that listed companies will be required to report on how they have applied "the main principles" set out in Section 1 of the Combined Code. This change will come into force on 29 June 2008 for financial reporting periods beginning on or after this date. At present, rule 9.8.6R(5) requires companies to state how they have applied "the principles" in Section 1. With regard to this change, the FSA explains:

Where a company has applied the Code’s Main Principles by complying with the associated provisions it should be sufficient for the company simply to report that it has done so. However, where a company has taken additional actions to apply the principles or otherwise improve its governance, it would be helpful to shareholders to describe these in the annual report. We do not expect this to have any cost implications, and modification will benefit smaller companies by cutting back the amount of boiler-plate"

This change is one of many being made as part of the FSA's implementation of the Statutory Audit Directive (2006/43/EC) and the Company Reporting Directive (2006/46/EC). The latter requires companies whose securities are admitted to trading on a regulated market to produce a corporate governance statement in their annual reports. This statement must explain which corporate governance code the company has followed and the extent to which it has complied with the code. The UK rules governing the corporate governance statement will be introduced in new rule DTR 7 within the FSA Handbook and will come into force on 29 June 2008 for financial reporting periods beginning on or after this date. 

For further information see:
FSA policy statement | FSA newsletter | FSA consultation paper (Dec 2007) | FSA Handbook | Listing Rules | DTR 7 - corporate governance statements | Statutory Audit Directive | Company Reporting Directive |

UK: publishing the annual report and accounts - listed companies missing the new deadline

Under Disclosure and Transparency Rule (DTR) 4.1 listed companies are required to publish their annual report and accounts within 4 months of their financial year end. This rule implements Article 4(1) of the European Transparency Directive (2004/109/EC) and applies to companies with year ends after 20 January 2008. According to the FSA (acting as the UK Listing Authority):

Our recent experience, with the first issuers required to comply with these new rules, suggests that some companies have mistakenly believed that publishing Preliminary Results (required previously under the Listing Rules) within this period was enough to fulfil their obligations under DTR 4.1. This is not the case. We would remind issuers that we are able to suspend the listing of, or even take enforcement action against, companies who do not publish the required financial information within the required deadlines, and may employ this where necessary in the future".

For further information see this update. 

UK: developments in corporate governance affecting the responsibilities of auditors of UK companies

The Auditing Practices Board has today published Bulletin 2009/4: Developments in Corporate Governance Affecting the Responsibilities of Auditors of UK Companies: see here (pdf). The bulletin considers the directors' statement on going concern, the corporate governance statement required by the Disclosure Rules and Transparency Rules, and changes to the structure of the listing regime.