FCA Issues Reminders on Annual Reporting and LTIP Disclosure Requirements
On 22 May 2024, the FCA published Primary Market Bulletin 49 (PMB 49) reminding listed companies of certain continuing obligations under the Listing Rules:
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Annual financial reporting — The FCA reminds companies of their disclosure and filing requirements for annual reports and provides observations on compliance rates. In particular:
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Filing requirements — The FCA noted instances in which annual reports have not been filed on the National Storage Mechanism (NSM) and/or the RNS of the annual report does not contain a statement that the full report is on the NSM or the website where the report is available (in each case, as required under the Listing Rules and/or DTRs).
The FCA also warned that it would suspend the listing of companies that fail to publish their annual reports within the deadline prescribed under the DTRs (four months following financial year end).
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Structured digital reporting — The FCA noted a low compliance rate amongst listed companies with respect to the requirement to disclose annual reports in structured digital format. This low compliance typically resulted from incorrect tagging of financial statements and a failure to upload the annual report to NSM in xhtml format. The FCA refers to the FRC Lab’s Structured digital reporting – 2023 insights, published on 7 December 2023, which provides guidance on best practice.
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LTIPs — The FCA undertook a thematic review during 2023 assessing 25 premium listed companies’ compliance with the Listing Rules disclosure obligations applying to LTIPs, and the nature of LTIP metrics and performance conditions.
The review found high levels of compliance with the Listing Rule requirements for LTIPs, including the requirement to seek shareholder approval and disclosing the full text or a description of the principal terms in the shareholder circular. The review also noted that financial metrics such as total shareholder return, return on capital employed, and earnings per share were the most commonly used LTIP performance metrics.
As we approach the end of the AGM season, this PMB serves as a timely reminder for listed companies to check whether they have satisfied these disclosure and filing obligations. Listed companies should also consider their ongoing compliance arrangements in light of the FCA’s observations, particularly given the continuing regulatory scrutiny on procedures, systems, and controls.
Government and FCA Provide Update on Implementation of Sustainability Disclosure Requirements
On 16 May 2024, the UK government published an update on the implementation of the Sustainability Disclosure Requirements (SDR) framework as set out in its Green Finance Strategy 2023. In particular, the government announced that it expects to complete the UK endorsement process of the International Sustainability Standards Board (ISSB) Standards by Q1 2025.
In turn, the FCA announced that, once the UK endorsement is completed in 2025, it will consult on amending its Listing Rules to move from the Task Force on Climate-related Financial Disclosures (TCFD) to UK-endorsed ISSB standards, and at the same time consult on strengthening its expectations for listed companies’ transition plan disclosures. Although the two main political parties have voiced their support for the SDR framework, the outcome of the upcoming general election to take place on 4 July 2024 may impact the timing of the UK endorsement of the SDR framework (and therefore the timing of the FCA’s consultation).
Listed companies should therefore familiarise themselves with the ISSB standards. The FCA states that companies may wish to start reporting voluntarily against ISSB standards ahead of the UK endorsement process. The FCA also indicated that it may provide additional guidance on how reporting based on ISSB standards can remain consistent with existing TCFD-based rules.
For further details on the UK update on the SDR framework, see this Latham article.
UK Investors Not Receiving Sufficient Information From GDR Issuers
As reported in PMB 49, the FCA undertook a thematic review to assess whether GDR issuers were meeting certain continuing obligations.
- Annual reports — A minority of GDR issuers did not upload their annual report to the NSM (with a notification sent to an RNS) as required under the Listing Rules.
- Corporate governance statements — A minority of GDR issuers did not include compliant corporate governance statements in their annual reports as required under the DTRs.
- General public disclosure of inside information — GDR issuers generally seem to disclose less information through RIS/NSM in the UK in comparison with the information published in home jurisdictions. The FCA states these discrepancies indicate potential non-compliance with MAR.
- PDMR notifications — Most GDR issuers (23 out of 26 sampled) had not submitted any PDMR transaction notifications, which indicates potential non-compliance with MAR to disclose PDMR securities dealings.
GDR issuers should ensure they comply with the continuing obligations arising from their UK listing. The FCA plans to continue using thematic reviews to assess such compliance.
US Securities and Exchange Commission Adopts Accelerated Settlement of Securities
With effect from 28 May 2024, most US broker-dealer transactions in securities are required to close T+1 (the first business day after the trade date) instead of T+2 (the second business day after the trade date). This affects virtually all equity securities transactions that settle in the US, including ADR facilities of UK listed companies.
As announced in March 2024, the UK has separately committed to moving to T+1 settlement by the end of 2027 and has established a technical group of industry experts to consider the implementation steps.
First UK Bribery Conviction of Foreign Public Official Offers Key Learning Points
On 10 May 2024, a former Chief of Staff to the President of Madagascar was sentenced to 3.5 years’ imprisonment for soliciting bribes from a UK-headquartered company contrary to the Bribery Act 2010.
The company in question tipped off the UK’s National Crime Agency, which used covert tactics to gather evidence for its ultimately successful prosecution.
This case provides important takeaways for companies — including factors to consider when deciding whether and how to report a suspected bribery/corruption issue and the need to review internal policies, procedures, and training. For further details, see this Latham blog post.
