Primary Market Bulletin No. 20: new technical notes published and consultation on further amendments

An overview of the changes made to, and proposed to be made to, the FCA’s Knowledge Base.

On 07 February 2019, the Financial Conduct Authority (FCA) published Primary Bulletin No. 20. This edition provides feedback on changes to the FCA’s Knowledge Base proposed in Primary Market Bulletin Nos. 12, 16 and 18 and the FCA is also consulting on further changes to the Knowledge Base. Comments on the proposed changes are due by 22 March 2019.

PMB 20 also includes information on the use of the name UK Listing Authority, the results of the Debt Market Forum Survey, the new online portal for submissions to the Issuer Management team, discusses how to apply the Listing Rules if an issuer has previously had insufficient distributable reserves to pay dividends and looks at the requirements for reports on payments to governments for certain issuers admitted to trading on a regulated market and whose home state is the UK.

Phasing out UKLA name

The FCA will phase out the UKLA name and will instead refer to the FCA's primary market functions. The change is to provide clarity, as there has been confusion about the nature of the UKLA. The FCA expects issuers and advisers to phase out the terms UKLA and UK Listing Authority when updating documents. It does not, however, expect documents to be revised just to remove references to the UKLA and the Listing Transactions Department will not comment on this when reviewing draft documents.

Insufficient distributable reserves form paying dividends

The FCA draws issuers attention to the fact that, in the last few years, they have seen resolutions put to shareholders in general meetings seeking to rectify situations where dividends have been paid in a manner that has infringed relevant company law, and remind premium listed issuers to consider how to apply LR 11 when this occurs.

In the cases the FCA have seen, issuers have neglected to file their interim accounts for a certain period at Companies House so that the distributable reserves shown in the last annual accounts have not been enough to allow for the amount of dividends paid.

On discovering the oversight, issuers have tried to put the company, its shareholders, directors and former directors in the position they would otherwise have been in had the accounts been filed. This has included seeking shareholder approval to release any liabilities that may attach to the shareholders and any directors or former directors. Given that significant shareholders, directors and, in some instances, former directors are classified as related parties under LR 11, premium listed companies are required to consider the application of these rules when such an approach is proposed. The FCA refers issuers to UKLA/TN/204.2 for further guidance on this point.

Changes to the Knowledge Base

The FCA has published several new and amended technical notes. The changes can be broken down into five broad categories: governance and conduct, sponsor services, the Listing Rules, the Prospectus Rules and the DTRS.

Governance and conduct

Amendments have been made to the existing technical note Share buybacks with mix and match facilities (UKLA/TN202.2) to delete reference to LR 12.6 (which has been removed from the FCA's Handbook) and to clarify that not all buyback programmes fall within the exemption provided in Article 5 of MAR. Trading in own shares in a buy-back programme is exempted from insider dealing, unlawful disclosure of inside information and market manipulation only when issuers satisfy the criteria set out in Article 5 of MAR and in the Commission Delegated Regulation (EU) 2016/1052.

Sponsor services

There are three new and one amended technical notes which provide useful guidance to help sponsors fully understand the FCA’s expectations when demonstrating that due and careful enquiry has been undertaken by sponsors to enable them to make the required declaration(s) to the FCA. The guidance is not intended to be exhaustive and a sponsor should exercise professional judgement when it decides what steps it should take to comply with the relevant rule. The technical notes are:

  • Sponsors’ obligations on financial position and prospects procedures (UKLA/TN/708.3) an amended version of the existing technical note setting out the work the FCA expects a sponsor to carry out to comply with its obligations under LR 8.4.2R(4) to ensure the directors of an applicant have established procedures which provide a reasonable basis for them to make proper judgements on an ongoing basis as to its financial position and prospects.
  • Sponsors’ duty regarding directors of listed companies (UKLA/TN/718.1) a new technical note setting out the work the FCA expects a sponsor to carry out to comply with its obligations under LR 8.3.4R to ensure that the directors of an applicant or listed company understand their responsibilities and obligations under the Listing Rules, the Disclosure Requirements and the Transparency Rules (together the Rules).
  • Sponsors’ obligations on established procedures (UKLA/TN/719.1) a new technical note setting out the work the FCA expects a sponsor to carry out to comply with its obligations under LR 8.4.2R(3) to ensure the directors of an applicant have established procedures which enable it to comply with the Rules on an ongoing basis.
  • Sponsors’ obligations on no adverse impact (UKLA/TN/720.1) a new technical note setting out the work the FCA expects a sponsor to carry out in order to comply with its obligations under LR 8.4.12R(2) to ensure that a listed company’s ability to comply with the Rules are not adversely affected when the listed company undertakes certain transactions.

See our article “Primary Market Bulletin No. 20: new and amended guidance on sponsors’ obligations published” for a more detailed summary of the FCA’s guidance in these four technical notes.

Listing Rules

The existing technical note Profit forecasts and estimates (UKLA/TN/340.2) has been amended mainly to set out the matters that the FCA will take into account when determining whether the reasons for an existing profit forecast or estimate being deemed to be no longer valid are credible. If an existing forecast or estimate is no longer valid, the issuer is not obliged to state the assumptions behind the forecast in a prospectus or class 1 circular nor, in the case of a prospectus, have an accountant’s report on the forecast. The note also includes a selection of typical factors that the FCA has seen, together with some considerations on when these are more or less likely to be credible reasons for invalidity. However, the FCA advises that the list is not exhaustive nor should it be taken that these reasons will always be accepted as it will assess each case on its merits.

There is a new technical note Quantified Financial Benefits Statements (UKLA/TN/315.1) setting out the FCA’s approach to the inclusion in prospectuses or circulars of reports from reporting accountants and financial advisers prepared for the purposes of Rule 28.1(a) of the City Code on Takeovers and Mergers (the Code) or confirmatory statements from reporting accountants and financial advisers given for the purposes of Rule 27.2(d)(ii) of the Code. The FCA advises that if a report, statement based on a report or confirmatory statement is included in a prospectus or supplementary prospectus a consent and authorisation statement covering the report or statement must be included and the reporting accountants and financial advisers will need to accept responsibility for the same and include a statement in the document to this effect. If such a report or statement is included in a class 1 circular or related party circular, the FCA advises that an appropriate consent statement must also be included.

Prospectus Rules

The existing technical note Exemptions from the requirement to trading and the marketing of securities (UKLA/TN/602.2) has been amended to reflect the changes made by the new Prospectus Regulation that came into force on 20 July 2017 (ie a new prospectus will not be required for the admission to trading of fungible shares representing less than 20% (up from 10%) of the same class of shares already admitted to trading on the same regulated market).

A new technical note FRS 102 Cash Flow Statement Exemptions (UKLA/TN/635.1) considers the interaction between the ability under FRS 102 for investment funds that meet certain conditions to be exempt from preparing cash flow statements and the requirement under Annex 1 Part 20.1 of Prospectus Rules Appendix 3 which requires that audited financial information in a prospectus prepared according to national accounting standards must include a cash flow statement. The FCA advises that whilst it has the power to authorise the omission of information from a prospectus in limited circumstances any request for omission of a cash flow statement will be considered on a case-by-case basis and the FCA should be contacted at an early stage.


Existing technical note Scope and application of vote holder and issuer notification rules (UKLA/TN/541.2) has been amended to reflect the updated DTRs as a result of the UK implementing the Transparency Directive Amending Directive (2013/50/EU). The FCA had delayed implementation due to feedback that the revised definition of issuer in that Amending Directive had the effect of changing the scope of the vote holder notification regime, to apply it to all GDR issuers. The FCA state that, in the absence of a formal decision by the EU, the FCA remain of the view that GDR issuers are not within the scope of DTR 5 unless the issuer’s shares are admitted to trading on a regulated market. The reasoning is that Article 9 (1) of the Transparency Directive states that the scope of the major shareholder notifications regime is issuers whose shares are admitted to trading on a regulated market and to which voting rights are attached. As a GDR is not a share, the fact that it may be admitted to trading on a regulated market does not itself bring the GDR issuer within the scope of DTR 5. The final note is therefore the same as the consultation draft.

Proposed Changes to the Knowledge Base

Procedural Note: Sponsor Service Enquiry Line (FCA/PN/912.1) is a proposed new procedural note which would replace the Sponsor Service Enquiry Line (SSEL) terms of use. The SSEL currently allows sponsors to obtain oral guidance on a named basis on technical matters that arise in the context of a sponsor service. The new note would remove the current Nominated Caller concept; instead "Key Contacts" would be able to use the service.

Procedural Note: Schemes of Arrangement (FCA/PN/913.1) is a proposed new procedural note that sets out potential approaches for issuers to take when implementing transactions by way of a scheme of arrangement to ensure that there is a simultaneous admission of the new shares to listing and cancellation of the existing issuer’s listing.

Technical Note: Compliance with the Listing Principles and Premium Listing Principles (FCA/TN/203.4) is proposed to be amended, as a result of the FCA’s guidance for sponsors in the new and amended technical notes referred to above, to remind issuers to cooperate with their sponsor(s) by providing all information the sponsor(s) reasonably requests to carry out the sponsor service in accordance with LR 8. It notes that this is likely to include access to relevant meetings with directors and, where applicable, senior management.

Procedural Note: Primary Market Oversight and Listing Transactions - decision making and individual guidance process (FCA/PN/908.2) - this note summarises how FCA decision-making powers in relation to FCA responsibilities under FSMA Part VI (Official listing) are delegated to and exercised by FCA staff. The FCA is proposing to update it to reflect FCA organisational changes and new procedures for individual guidance, appeals and complaints.

Procedural Note: UKLA standard comments (UKLA/TN/906.2) - is proposed to be deleted as the FCA no longer uses comment sheets and instead handles the comment process through the ESS.

Proposed amendments to PD Advertisement regime (UKLA/TN/604.2) were consulted on in PMB 13. The changes were proposed as a result of the Commission Delegated Regulation (EU) 2016/301 regarding the approval and publication of prospectuses and advertisements and changes made to the Prospectus Rules, but they were postponed because of the FCA's work on the availability of information in IPO processes. The FCA states, in PMB 20, that it will return to this topic in due course.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.