AFME and EURO IRP publish guidance on issuer access for unconnected analysts in UK IPOs

​An overview of the guidance for unconnected analysts published on 20 August 2018.

Under the new IPO reform rules, which took effect on 01 July 2018, an approved prospectus or registration document must be published and unconnected analysts must have had access to an issuer’s management before any connected research can be published. These changes apply to both premium and standard UK listings. (See FCA rule changes alter the availability of information in the UK equity IPO process for more information.)

On 20 August 2018, the Association for Financial Markets in Europe’s (AFME) Equity Capital Markets Division and the European Association for Independent Research Providers (Euro IRP) published guidance for unconnected analysts (Guidance) which sets out:

  • processes for syndicate banks to give unconnected analysts access to issuers, and
  • standard guidelines which those unconnected analysts are expected to sign up to in order to obtain access.

Unconnected analysts’ access

The new rules (in COBS11A) require syndicate banks to carry out an assessment of the potential range of unconnected analysts (ie those not employed by the syndicate banks) and to use that assessment to provide an opportunity for access to management to a range of unconnected analysts which, in their reasonable opinion, “has a reasonable prospect of enabling potential investors to undertake a better-informed assessment of the present or future value of the relevant securities based on a more diverse set of substantiated opinions”. Syndicate banks must keep a written record of their assessment and opinion and keep it for five years.

The rules give issuers and syndicate banks a degree of flexibility on how and when unconnected analysts are given access to management, which will determine when connected research by syndicate analysts can be published.

The two options provided in COBS11A and the Guidance are:

  • to provide unconnected analysts with access to management on equal terms at the same time as connected analysts, in which case publication of connected research is permitted one day after publication of the approved registration document (Option I), or
  • if issuers and syndicate banks want to provide management access to unconnected analysts separately from the syndicate analysts following publication of the registration document, this is permitted provided that the connected research is not published until at least seven days after publication of the approved registration document (Option II).

Reasonable terms

The Guidance requires the engagement of unconnected analysts to be on "reasonable terms". Restrictions on access will generally be treated as "unreasonable" if they are more restrictive than those imposed on connected analysts, including geographical restrictions. However, if Option II is followed, issuers can elect to share information with the unconnected analysts at an in-person meeting or by making equivalent information available on a website (with unconnected analysts provided an opportunity to ask questions of the issuer by email or otherwise).

Where unconnected analysts are given access to the issuer separately from the connected analysts under Option II, they must receive identical information to the information that was given to connected analysts which is relevant for the purposes of preparing investment research on the issuer and syndicate banks will have to keep written records of the information provided to both sets of analysts.

Syndicate banks must keep records (at the time the offer of management access is communicated to the unconnected analysts) of any restrictions placed on unconnected analysts as a condition of being offered management access and keep them for five years.

Unconnected Analyst Research Guidelines

As noted above the Guidance sets out a process for syndicate banks to give unconnected analysts access to issuers. In particular, it sets out how unconnected analysts will be able to register their interest to communicate with the issuer team and the manner and form that communication with the issuer team should take under Option I and II.
An unconnected analyst who wants to communicate with an issuer team under either option will be required to confirm that they agree to and will comply with the Market Standard Research Guidelines set out in Appendix I to the Guidance, which include requirements for any unconnected analyst to agree:

  • to keep the fact and details of the IPO confidential until the formal announcement of the transaction
  • to be bound by the same geographic restrictions relating to the distribution of research before completion of the IPO as connected analysts
  • not to publish their research until the dates that connected analysts are permitted to publish their research under Options I and II respectively
  • to use reasonable endeavours to publish research, wherever possible, before publication of the price range prospectus or, in the case of a tripartite prospectus, the securities note and summary, and
  • to acknowledge that there is an expectation that research will not be published in the seven calendar days before pricing.

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.