A company with a premium listing must appoint a sponsor on each occasion that it:
A company with a premium listing must also obtain guidance from a sponsor each time it proposes to enter into a transaction which is, or may be, a significant transaction requiring shareholder approval, a reverse takeover or a related party transaction.
Once listed, a company with a premium or standard listing will be subject to a continuous disclosure requirement designed to prevent the creation of a false market in the company's securities. The company will be required to publicly disclose any inside information that directly concerns the company.
Broadly, inside information is information which:
In determining the likely price significance of information, a company should assess whether the information in question would be likely to be used by a reasonable investor as part of the basis of his or her investment decisions and would therefore be likely to have a non-trivial effect on the price of the company's financial instruments.
When inside information is disclosed, the company must make the information available on its website by the close of the business day following its release and keep it there for a period of at least five years. Where a public disclosure includes inside information, the company must clearly identify: that the information communicated is inside information (usually satisfied by including a prominent legend to that effect); the identity of the person making the public disclosure; and the date and time of the public disclosure.
A company whose financial instruments are also listed or admitted to trading on any foreign stock exchange or regulated market must take reasonable care to ensure that the disclosure of inside information is synchronized as closely as possible in each jurisdiction.
A company may delay the disclosure of inside information in certain circumstances. This is permissible where a company is faced with an unexpected and significant event, in which case a short delay may be acceptable if necessary to clarify the situation. In such circumstances, a holding announcement should be released if there is a danger of the inside information leaking out before the facts and their impact can be confirmed. In addition, in circumstances where the issuer considers that immediate disclosure of inside information is likely to prejudice the issuer's legitimate interests, an issuer may delay the disclosure provided that to do so would not be likely to mislead the public and the issuer is able to ensure the confidentiality of the information. Where an issuer delays the disclosure of inside information, it must inform the FCA that disclosure of the information was delayed immediately after the information is disclosed to the public. The FCA may request that the issuer provides a written explanation of how the conditions outlined above were met.
In order to control access to inside information, listed companies and any person acting on their behalf or on their account are each required to draw up a list of persons who have access to inside information. Insider lists must be prepared in accordance with a prescribed template identifying each person having access to inside information and be updated promptly to reflect new people gaining, or existing insiders ceasing to have, access to inside information. Insider lists must be kept for a period of at least five years from being drawn up or updated and must be provided to the FCA upon request. Listed companies must also ensure that every person on an insider list acknowledges their obligations under the insider dealing and market abuse legislation and is aware of the sanctions that might be imposed for breaches of such legislation.
In addition to the continuous disclosure regime there are a number of specific requirements that listed companies and certain other persons must comply with. These include:
The disclosure must state the effective date of the change if it is not with immediate effect. If the effective date of the change is not yet known this should be stated and a further disclosure made as soon as the effective date has been decided. In the case of an appointment, the notification must also state whether the position is executive, non-executive or chairman and the nature of any specific function or responsibility.
or an appropriate negative statement. Disclosure must be made as soon as possible following the decision to appoint the director and in any event within five business days of the decision.
Public disclosure for London listed companies is typically made through a RIS. RISs comprise primary information providers (PIPs) approved by the FCA and similar organizations established elsewhere in the EEA. These organizations receive announcements from issuers and then disseminate the full text of these to secondary information providers such as Bloomberg and Reuters. Disclosure to a RIS will fulfill a company's requirement for public disclosure. In some circumstances, a listed company is also obliged to make information available on its website (such as inside information, its annual report and results of shareholder meetings). All regulatory announcements made through a RIS that is a PIP approved by the FCA are also automatically filed with the UK's Officially Appointed Mechanism for the storage of regulated information, the National Storage Mechanism. Companies making announcements via RIS are required to include a Legal Entity Identifier or LEI (a unique 20-character reference code identifying the company) in announcements of regulated information and to classify such regulated information according to specified categories. This is designed to facilitate the ability to search for regulated information across the EEA via a new European electronic access point (EEAP).Financial statements
A company must publish an annual financial report not later than four months after the end of its financial year. The report must remain publicly available for at least ten years. The report must include the audited financial statements, a management report and responsibility statements.
For a company which is required to prepare consolidated accounts, the audited financial statements must comprise consolidated accounts prepared in accordance with UK-IAS and accounts of the parent company prepared in accordance with the laws of the State in which the parent is incorporated.
The annual financial report must be prepared using the single electronic reporting format adopted by the EU (known as the European Single Electronic Format or ESEF) for financial periods beginning on or after 1 January 2020 for publication from 1 January 2022. They also need to file them with the FCA's National Storage Mechanism (NSM). Among other things, ESEF requires the annual financial report to be prepared in XHMTL, which is human readable and can be opened with a standard web browser. Where an annual financial report contains IFRS consolidated financial statements, these must be labelled with XBRL tags, which make the labelled disclosures structured and machine-readable.
The company's financial statements must be audited in accordance with Part 16 of the Companies Act 2006 and the audit report must be reproduced in full as part of the annual financial report.
Where an issuer is a UK-traded third country company, it must ensure that the person who provides the audit report is:
The management report must contain a fair review of the company's business and a description of the principal risks and uncertainties facing the company and must otherwise comply with more detailed requirements set out by the FCA.
Responsibility statements must be made by the persons responsible within the company (whose names and functions must be clearly indicated) and set out that, to the best of the knowledge of each person making the statement, the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and its consolidated undertakings, taken as a whole; and the management report includes a fair review of the development and performance of the business and the position of the company and its consolidated undertakings, taken as a whole, together with a description of the principal risks and uncertainties that they face.
A company with a premium listing must also include in its annual report a report to the shareholders by the board containing details of the unexpired term of the director's service contract of any director proposed for election or re-election at the next annual general meeting, or a statement that such director has no service contract.
The auditors' report on the company's financial statements must cover some of these disclosures. If the company has not made the requisite disclosures, the report must include, to the extent possible, a statement giving details of the non-compliance.
As well as the annual financial report described above, the company must also publish a half-yearly financial report covering the first six months of the financial year. The report must be published not later than three months after the end of the period to which it relates, and must remain publicly available for at least ten years.
The half-yearly financial report must contain: a condensed set of financial statements, an interim management report and responsibility statements.
The half-yearly financial report must contain (a) an indication of important events that have occurred during the first six months of the financial year (and their impact on the condensed set of financial statements); and (b) a description of the principal risks and uncertainties facing the company for the remaining six months of the financial year, and must otherwise comply with the detailed requirements set out by the FCA.
If the half-yearly financial report is not audited, a company must make a statement to this effect in the report.
The accounting policies and presentation applied to the half-yearly figures must be consistent with those applied in the latest published annual accounts, unless the FCA otherwise agrees or the accounting policies and presentation are to be changed in subsequent annual accounts.
Companies are no longer required to make a public statement during both the first and the second six-month periods of the financial year providing an explanation of material events and transactions that have taken place during the relevant period (such as quarterly financial reporting), but may do so on a voluntary basis.
Non-EEA companies which publish quarterly financial reports outside the EEA (whether in accordance with national legislation or the rules of a non-EEA market or of their own volition) must disseminate such quarterly financial reports in the EEA as widely as possible.
Companies from the United States, Canada, China, Japan, South Korea and Switzerland may publish their home country financial reports in the United Kingdom in lieu of complying with the above requirements.
Certain companies active in the extractive and logging of primary forestry industries are required to prepare a report annually on the payments that they make to governments. The report must be prepared in accordance with Chapter 10 of the EU Accounting Directive (2013/34/EU) or the UK Reports on Payments to Government Regulations 2014. The company must file the report with the FCA and upload it to the National Storage Mechanism. The report must be made public at the latest six months after the end of each financial year and must remain publicly available for at least ten years.Insider dealing
The Criminal Justice Act 1993 provides that it is a criminal offence for an individual who has inside information, and has that information as an insider, to deal in securities on the LSE or another regulated market, or through a professional intermediary. For an offence to be committed, the individual must know that the information is inside information and he must have knowingly acquired it from an inside source. There are also offences of encouraging dealing and disclosure by persons who have inside information.
For these purposes, inside information is, broadly speaking, specific or precise unpublished information relating to a particular issuer or particular securities which, if made public, would have a significant effect on the price of any securities. It should be noted that a director who knowingly has inside information about his company, or any other company with which his company has dealings, would be an insider for the purposes of the insider dealing legislation.
The penalty for an offence under the Criminal Justice Act 1993 is, on summary conviction, to a fine not exceeding the statutory maximum or imprisonment for a maximum of six months, or to both. On indictment the penalty is a fine or imprisonment not exceeding a term of ten years, or to both. There are a number of defenses, but it should be noted that these are normally restrictively interpreted and the burden of proof lies with the defendant.Market abuse
The civil prohibition on market abuse is contained in Regulation 596/2014 of the European Parliament and of the Council on market abuse as applied in the UK pursuant to the European Union (Withdrawal) Act 2018 (as amended), and as supplemented by the Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) (UK MAR). UK MAR works in tandem with the criminal sanctions against insider dealing and market manipulation. Broadly speaking, market abuse under UK MAR consists of insider dealing, unlawful disclosure of inside information and market manipulation in relation to financial instruments admitted to trading on a regulated market.
Insider dealing arises where a person possesses inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates. The use of inside information by cancelling or amending an order concerning a financial instrument to which the information relates where the order was placed before the person concerned possessed the inside information is also considered to be insider dealing. Recommending or inducing another person to engage in insider dealing may also constitute insider dealing.
Unlawful disclosure of inside information arises where a person possesses inside information and discloses that information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession or duties.
Market manipulation comprises various specified activities which have the effect of misleading and/or distorting the market for financial instruments or benchmarks.
In addition, the FCA have published a set of provisions called MAR 1.3 which give guidance to assist in establishing what type of conduct would be permitted and what type of conduct would be prohibited as market abuse for the purposes of UK MAR.
Under the Financial Services and Markets Act 2000, as amended, the FCA, as regulator of the financial markets, can impose unlimited fines, public censure, a temporary or permanent prohibition on an individual holding certain positions in an investment firm, a temporary prohibition on an individual acquiring or disposing of financial instruments and/or other penalties for engaging in market abuse. The FCA also has the power to require a company to publish specified information or a specified statement in certain circumstances, including where the company has published false or misleading information or given a false or misleading impression to the public. The FCA may institute proceedings not only for direct engagement in market abuse but also for acts or omissions which require or encourage another to engage in behavior which would constitute market abuse if engaged in by the person who encouraged the other.
It should be noted that proof of intent to engage in market abuse is not required: it is sufficient that the behavior satisfies the criteria for market abuse.