Reforming the FCA Knowledge Base: Primary Market Bulletin 51
The Financial Conduct Authority has published Primary Market Bulletin 51 which provides feedback on the changes to the FCA’s technical notes that were published for consultation in Primary Market Bulletin 48 (see our briefing here).
How is the Knowledge Base changing?
The changes made in the revised technical notes are mostly fairly minor and consequential on the introduction of the new UKLR.
The FCA is taking a phased approach to updating the Knowledge Base following the reform of the UK listing regime. PMB 48 tackled the technical notes that the FCA considered (i) the more essential in supporting the new UK Listing Rules; or (ii) the more frequently used. These included the technical notes on independent business requirements, class tests, related party transactions various sponsor obligations, and sponsor competence.
The majority of the changes to the technical notes set out in PMB 48 have been finalised, in PMB 51, in the same form as the consultation draft with minor changes due to differences between the draft UKLRs (on which the consultation drafts were based) and the final rules.
FCA further explains certain amendments
In a number of technical notes (for example TN/704.4: The sponsor’s role on working capital confirmations) the FCA added wording to the effect that sponsors need not presume that accountant/expert reports are always required to help fulfil their obligations. PMB 51 acknowledges that the FCA received feedback that this drafting has the potential to cause confusion in the market because it would no longer be clear when such reporting is required. However, the FCA has retained the wording and highlights that sponsors should use their judgement in these decisions.
In relation to amendments made to Primary Market/TN/633.2: Pro forma financial information, the FCA received feedback that it should emphasise the issuer’s choice of the form of the disclosure in a significant transaction announcement, to ensure flexibility. The FCA explains in PMB 51 that there is no intention to introduce a de facto requirement to include pro forma financial information in significant transaction announcements and the technical note merely states that issuers may want to include this information and sets out the requirements where that is the case.
Technical notes subject to further consideration
PMB 51 sets out a number of draft technical notes that have not been finalised and will be considered further by the FCA. These include:
- UKLA/TN/103.1: Independent business requirements: following feedback, the FCA will consider this technical note further, including adding guidance on the acceptability of certain issuer structures; and
- UKLR/TN/307.1:Aggregating transactions: in the draft UKLRs covering significant transactions, when aggregated transactions reached the 25% threshold in any of the class tests, the requirements of UKLR 7.3 applied in respect of the aggregated transactions as a whole. This changed in the final rules such that there are now different outcomes following aggregation, depending on the nature of the transactions. Given this change, further amendments will be considered in respect of this technical note.
- UKLA/TN710.1:Principles for sponsors: this technical note has not been finalised as the FCA want to add practical examples to help describe the proper extent of sponsor services, particularly where preparatory work may be done for a matter that subsequently falls within the definition of sponsor services.
Technical notes that are being deleted
As well as amendments, a number of technical notes are being deleted where the relevant rules have not been carried over to the new UKLR (for example the technical note relating to financial information and track record requirements).
