Listing reform reaches the FCA Knowledge Base: Primary Market Bulletin 48

The Financial Conduct Authority has published Primary Market Bulletin 48 which consults on the changes it proposes to make to the guidance in its Knowledge Base, as a result of the reforms to the Listing Rules set out in CP 23/31 (see our briefing here).

A phased approach

The FCA will be taking a phased approach to updating the Knowledge Base and this first consultation tackles the existing technical notes the FCA considers are: (i) the more essential in supporting the new UK Listing Rules; or (ii) the more frequently used. These include the technical notes on independent business requirements, class tests and related party transactions. As well as proposed amendments, a number of technical notes are also deleted where the relevant rules are not being carried over to the new UKLR (for example the technical note relating to financial information and track record requirements).

Sponsors

A large proportion of the amended technical notes concern the sponsor regime and the feedback the FCA has received in relation to these obligations. The amendments address some of the concerns around record-keeping and the extent to which third party expert reports must be challenged but the amendments do not sign-post more radical changes to the sponsor regime.

A new technical note is also proposed which sets out the FCA's expectations of sponsors when assisting an issuer during a modified transfer process. This process enables issuers, which meet certain conditions, to transfer from the (newly formed) secondary and transitional listing categories to the commercial companies, shell companies and closed-ended investment funds categories more easily. As part of this process, the sponsor must declare to the FCA that it has not identified any adverse information that would lead it to conclude that the issuer would not be able to comply with its obligations under the listing rules, disclosure requirements and transparency rules. The new technical note confirms that this declaration can be made on the basis of the lighter due diligence process the sponsor undertakes as part of the modified transfer process – a broader assessment of the issuer's procedures, systems or controls will not be required.

Timing

Due to the phased approach taken to updating the Knowledge Base, this first batch of amended technical notes reflect the proposed UK Listing Rules as set out in CP 23/31. If the rules are redrafted, following feedback, the updated technical notes will be amended and a re-consultation will take place.

Some amendments to existing technical and procedural notes will take place after the implementation of the UKLR. Pending these further updates, the FCA expects market participants to take a purposive approach to the interpretation of existing Knowledge Base guidance.

PMB 48 states that FCA expects to seek board approval for the final UKLRs in June or July.

Mapping

A major part of the reform of the UK Listing regime is the removal of the premium and standard listing segments in favour of a single UK listing, split into a number of different categories depending on the nature of the issuer. The FCA will map existing listed issuers into their new categories. PMB highlights that issuers will be notified of their new listing category by mid-May. Issuers who believe they have been incorrectly allocated will have four weeks to revert to the FCA.

Other matters

In CP 23/31 the FCA proposed that, as part of the listing process, a company's board would have to confirm that the applicant has appropriate systems and controls in place to ensure it can comply with its ongoing listing obligations and Listing Principles. PMB 48 contains a draft of the new Procedures, Systems and Controls Confirmation Form that will be used for his purpose.