SUMMARY

Primary Market Bulletin No. 44 reminds issuers of the:

• use of multimedia content (including audio and video) in regulatory news announcements;
• FCA’s position on the requirement for a prospectus when shares are allotted under a scheme of arrangement (mix and match facility); and
• new disclosure obligations under the Listing Rules on diversity and the FCA’s approach to monitoring compliance.

Regulatory news announcements using multimedia content

There is a new practice in the market where some Primary Information Providers (who are approved by the FCA to act as regulatory information services) are offering issuers the ability to include multimedia content (eg. audio and video) in regulatory news announcements. To address concerns/risks around this practice, the FCA makes the following points:

• multimedia content should not form part of any regulated information (ie. information required to be disclosed under the DTRs and the Market Abuse Regulation (MAR)) disseminated to the public. This can lead to a reduction in clarity on what is the regulated information and could breach the DTRs and MAR;
• there is an increased risk of inadequate due diligence on multimedia content as opposed to text format;
• splitting information between text format and multimedia content could mislead market users if, for example, it leads to the regulated information communicated becoming misrepresented or distorted; and
• regulated information should be communicated in unedited full text and inside information should not be disclosed with the marketing of an issuer’s activities.

The FCA will continue to monitor the use of multimedia content in regulatory news announcements to assess developments in the identified risks.

Schemes of arrangement and prospectuses

The FCA has always been of the view (first confirmed in UKLA List! Issue No.23 December 2009) that a scheme of arrangement (scheme) with a mix and match facility offering a choice between shares and cash, would require a prospectus (absent an exemption). Contrary to this, the market/legal advisers have generally disagreed with this view on the basis that under a scheme, there is no ‘public offer’ which enables investors to buy or subscribe for securities but instead there is a court procedure where members/creditors are asked to vote on and approve an arrangement resulting in the allotment of securities to shareholders. In recent years, a small number of issuers have offered mix and match facilities without producing a prospectus.

In August 2020, the FCA published a draft Technical Note for consultation reaffirming its view that if a shareholder is asked to make a choice between different forms of consideration, an issuer should produce a prospectus (absent an exemption) because an investor is deciding to buy or subscribe for the securities in question. The FCA has now decided, having considered the responses to its draft Technical Note (all responses agreed that no ‘public offer prospectus is required’ in these circumstances), not to proceed with the Technical Note. Although their analysis remains unchanged, the FCA has recognised that this is a question of law and ultimately it is for the courts to decide. It is also worth noting, under proposals to reform the prospectus regime, that the law may be clarified in future to make clear that securities allotted under a scheme will fall outside of the ‘offer to the public’ regime.

New Listing Rules on diversity

To promote disclosure of diversity on listed company boards and executive committees, the Listing Rules now require standard and premium listed companies to publish a ‘comply or explain’ statement in their annual reports on whether they have achieved (i) 40% female representation on their boards; (ii) at least one of the senior board positions is held by a woman; and (iii) at least one member of the board is from a minority ethnic background, together with standardised numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions and executive management.

The rules apply for financial years beginning on or after 1 April 2022 and most companies will not report on these requirements until 2024 or Q2 2023 at the earliest.

To help companies comply with these requirements, the FCA aims to identify areas of concern and disseminate examples of good practice. The FCA will conduct periodic reviews of annual reports and if listed companies are not meeting these requirements, they may ask them to take corrective action, for example enhancing their disclosures in subsequent annual reports.

Source: Primary Market Bulletin No. 44

[View source.]