Pre-Emption Group Reports Widespread Adoption of Updated Principles

On 5 March 2024, the Pre-Emption Group (PEG) published its first report monitoring the use of its updated Statement of Principles on the disapplication of pre-emption rights for UK listed companies. The Principles were updated in 2022 to reflect recommendations from the UK Secondary Capital Raising Review to increase the level of disapplication authority that companies can request up to 20%.

Key findings from the report (covering AGMs from November 2022 to July 2023) include:

• 55.7% of FTSE 350 companies with an AGM during the study period sought the enhanced disapplication authority allowed under the new Principles;
• 65.7% requested authority for a specified capital investment, in addition to general corporate purposes; and
• 98.3% had all disapplication resolutions passed by shareholders, with only a small number seeing significant dissent.

Companies were also reminded that, under the new Principles, they should send a post-transaction report to the PEG upon completion of a capital raising where they have utilised a disapplication authority.

FCA Unveils Proposed Arrangements for Transactions Straddling Implementation Date of New Listing Regime

On 7 March 2024, the FCA published the complete draft instrument for the new UK listing rules. Although the consultation paper (CP23/31) from December 2023 already set out the policy proposals, the draft instrument contains additional detail including how transactions by premium listed issuers not yet completed on the implementation date (“mid-flight” transactions) would be treated.

Key points:

• Upon the implementation date, mid-flight transactions would no longer need to comply with premium listing requirements not carried forward into the new regime. As such, companies will no longer be required to retain a sponsor for the relevant mid-flight transaction, if a sponsor is not required for that transaction under the new rules.
• However, mid-flight transactions will have to comply with relevant obligations under the new rules (e.g., obligation to release a transaction announcement with prescribed content as soon as reasonably practicable after the implementation date) even if the transaction was previously notified to a RIS before the implementation date.
• An exception applies where the issuer has sent a circular to shareholders about the mid-flight transaction under the current regime — in this scenario, a further release of a RIS with the new prescribed disclosure requirements would not be necessary, unless the terms have materially changed.

Please see the latest Latham UK Primary Markets Reform Tracker for an overview of the proposed changes.

Indicative Changes to the FTSE UK Index Series Ground Rules Following UK Listing Reforms

On 15 March 2024, FTSE Russell announced provisional revisions to its FTSE UK Index Series ground rules as a result of the proposed new UK listing regime, together with FAQs to help index users understand the potential implications. Broadly, FTSE Russell will implement changes solely to reflect the new listing segments.

Top takeaways:

• The equity shares in commercial companies (i.e., new single segment) and closed-ended investment fund listing categories will become the eligible index universe for the FTSE UK Index Series, replacing the premium segment.
• No proposals were made to change the other inclusion requirements (e.g., minimum free float of 10% for UK companies and 25% for non-UK incorporated companies).
• FTSE Russell does not intend to introduce any additional inclusion requirements for the FTSE UK Index Series relating to the regulatory obligations which would replicate any current premium listing requirements — so there will be no “artificial” recreation of the premium and standard listing segments as a result of index inclusion criteria.

Given that existing premium listed issuers are expected to be mapped to the new equity shares in commercial companies or closed-ended investment fund listing categories, the direct index impact on existing FTSE constituents is expected to be minimal on the inception of the new UK regime.

FCA Proposes to Name and Shame at the Outset of Investigations

On 27 February 2024, the FCA published a Consultation Paper (CP24/2) on its proposed new approach to publicising enforcement investigations and changes to the FCA Enforcement Guide. In summary, the FCA hopes to deliver “impactful deterrence” by:

• focusing its efforts and resources on a “streamlined portfolio” of enforcement cases, targeting market abuse, fraud, and financial crime; and
• publicly announcing enforcement investigations at an early stage, including naming the firm/issuer involved (but generally not individuals).

The FCA requests responses by 30 April 2024, although it does not provide a timeframe for publishing final guidance. Market participants are likely to raise serious concerns about the FCA publicising investigations at such an early stage, and we anticipate a strong response to the Consultation Paper. For further details, see this Latham blog post.

Parker Review Shows Progress in Improving Ethnic Minority Representation on FTSE 350 Boards

On 11 March 2024, the Parker Review Committee published the 2023 results of its voluntary census on the ethnic diversity of the boards of FTSE 350 companies and 50 of the UK’s largest private companies. The report shows encouraging progress made by FTSE 350 companies in bringing ethnic minority directors on to their boards.

Summary of key data as at December 2023:

• 96% of FTSE 100 respondents have at least one ethnic minority director on their board (70% for the FTSE 250 — a significant improvement over 60% in 2022).
• 19% of all FTSE 100 directorships are represented by ethnic minorities (13.5% for the FTSE 250) — in each case, a small rise from the preceding year.
• The review also reported for the first time the representation of ethnic minorities in senior management (13% for the FTSE 100 and 12% for the FTSE 250). In particular, the review noted that the Black community is not proportionately represented at senior levels of business when compared with Black representation in the UK population as a whole.

FTSE 250 companies are now approaching the Parker Review’s target deadline of December 2024 to have at least one ethnic minority director on each of their boards. The Review encourages those FTSE 250 companies which have no ethnic minority directors to review what they might be able to do to meet the target.