UK: Changes To The Listing Rules In Relation To The Sponsor Regime

Last Updated: 28 November 2012
Article by Lucy Macpherson and Mark Howard

Introduction

In January this year the Financial Services Authority (FSA) published consultation paper CP 12/2 (CP 12/2) detailing proposed changes to the Listing Rules (LRs). The FSA stated that its intention behind the changes was to ensure that the rules are updated in line with existing and emerging market practices and to codify the material produced by the FSA.

This article focuses on the impending changes to the LRs in relation to the sponsor regime as outlined in consultation paper CP 12/25 (CP 12/25), which contains the final wording for the changes to the sponsor provisions of the LRs and discusses the feedback received in relation to CP 12/2. The proposed changes to the LRs include, in particular, clarification of the situations when a sponsor must be appointed, duties of sponsors and companies and record keeping obligations, with such changes to the sponsor regime due to take effect on 31 December 2012.

For an outline of the proposed changes to the LRs in relation to controlling shareholder and majority interest in business (CP 12/25) and the changes to the LRs, Prospectus Rules and Disclosure and Transparency Rules (Handbook Notice 123) please refer to the articles contained elsewhere in this PLC update.

Sponsor regime

The FSA's objective is that the sponsor regime be in place to minimise significant potential risks to the integrity of the premium equity market by:

  • ensuring an understanding of the regulatory framework imposed on premium listed companies undertaking transactions and applicants seeking a premium listing under part 6 of the Financial Services and Markets Act 2000; and
  • enabling the UKLA to receive assurances from an expert in the listing regime that such companies and applicants are complying with this regulatory framework.

The sponsor regime was last reviewed by the FSA in 2008 and it is hoped that the coming changes more accurately reflect the scope and nature of sponsor services, update the regulatory regime with current market practice and formalise the rules and obligations with which sponsors have to comply as well as assisting sponsors and clients in the balancing of their duties to the UKLA with their commercial interests.

The key changes are detailed below but full details can be found in CP 12/25 available on the FSA website (www.fsa.gov.uk).

Key changes

Scope of sponsor service (LR 8.2.1)

The remit of sponsor services has been extended so that a sponsor will be required to be appointed for services provided to premium listed issuers.

A sponsor will be regarded as providing a 'sponsor service' when there is a requirement for a sponsor to provide a key confirmation or assurance to the FSA, including for example, 'eligibility letters' and 'severe financial difficulty letters'. LR 8.2.1R(8) is amended to state that a new applicant must appoint a sponsor to submit a letter of eligibility to the FSA detailing how the applicant satisfies the eligibility criteria of the LRs. This is not a new requirement but a clarification of the current regime.

All communications between a sponsor and the FSA in connection with a sponsor service will now be included by the expanded definition of a 'sponsor service'. So for example, a sponsor should ensure that engagement letters and sponsor agreements are in place before making any communication to the FSA.

The FSA has also noted that sponsors' engagement letters and sponsor agreements should expressly acknowledge that the sponsors have regulatory duties to the FSA under the LRs which cannot be overridden.

Related party transactions and reverse takeovers (LR 8.2.1R)

Amendments to LR 8.2.1R will require a premium listed company to appoint a sponsor for the purpose of providing the FSA with confirmation that the terms of proposed smaller related party transactions (i.e. those not requiring shareholder approval), and the terms of any transaction described within a Related Party Circular, are 'fair and reasonable' from the shareholders' perspective.

The FSA noted in particular in CP12/2 that the amendment to LR 8.2.1R(7) requires sponsors to be appointed by issuers for the purpose of submitting LR13 Circulars and the sponsor appointment will solely be required for the fair and reasonable confirmation to be included in the Circular. It is appreciated that sponsors may seek expert advice to enable them to provide such confirmation.

Premium listed companies will also be required to appoint a sponsor to liaise with the FSA in relation to whether a suspension of a listing is appropriate prior to a reverse takeover being announced and for the purpose of confirming the issuer's declarations to the FSA where a target of a reverse takeover is not subject to a public disclosure regime.

Roles and responsibilities of sponsors (LR 8.3.1)

The amendments to LR 8.3.1 extend its requirements so that sponsors are obliged to provide the FSA with any explanation or confirmation the FSA may reasonably require to ensure that the LRs are being complied with by an applicant or listed company. The FSA regards this amendment as merely a formalisation of current market practice.

Sponsors are to take all reasonable steps to ensure that sponsor communications to the FSA are accurate and complete in all material respects to the best of their knowledge and belief. The FSA will consider whether a sponsor has used its own judgment, knowledge and expertise to review and challenge information it has provided to the FSA following reliance upon / provision of information from a third party.

A specific principle has also been introduced requiring sponsors to act with honesty and integrity in relation to a sponsor service.

Conflicts of interest (LR 8.3.7 and LR 8.7.12)

The FSA has clarified that a sponsor will be required to take all reasonable steps to identify conflicts of interest that could adversely affect the sponsor's ability to carry out its obligations under LR 8 as part of its ongoing conflict checking procedures (LR 8.3.7). Whilst sponsors may find it useful to maintain conflicts declarations for their own internal purposes, any such process should not detract from the ongoing nature of its obligation to the FSA.

Under the amended LRs sponsors will no longer be required to submit Conflict Declarations at specific points during a transaction (LR 8.7.12). The FSA emphasises that its overarching principle is for sponsors to identify and manage conflicts of interest throughout the provision of a sponsor service on an ongoing basis (i.e. there is a continuing obligation of identification and management of conflicts). Sponsors have responsibility for monitoring regulatory conflicts (i.e. between their obligations to the FSA and the commercial requests of their clients) as well as client conflicts.

Responsibilities of issuers (LR 8.5.6R)

Changes to LR 8.5.6 will place a specific obligation on premium listed companies and applicants to cooperate with their sponsor to ensure they are able to discharge their obligations to the FSA. The issuer will be required to cooperate with its sponsor by providing all information reasonably requested by the sponsor for the purpose of carrying out the sponsor service.

Document retention (LR 8.6.16AR)

Sponsors will be required to retain accessible information and records sufficient to demonstrate the basis on which its sponsor service has been provided. The guidance to the rule provides this means such records as would enable a person with a general knowledge of the sponsor regime, but not necessarily with any specific knowledge of the actual sponsor service being provided, to understand the basis on which material judgments have been made throughout the provision of the sponsor service (LR 8.6.16CG).

Sponsor notifications (LR 8.7.8 and LR 8.7.21AG)

Changes to the notification requirements in LR 8.7.8 will ensure that sponsors are required to notify the FSA in a number of new specific situations. For example, notification of any information that a sponsor reasonably believes could adversely affect market confidence in the sponsor regime.

The FSA has amended LR 8.7.21AG to clarify when a sponsor should submit a sponsor cancellation request and states that the list of situations provided in this LR is a nonexhaustive list of examples. Furthermore, if a sponsor submits a notification to the FSA and there are to be no ongoing discussions with the FSA (i.e. whereby the sponsor will not remain eligible) the sponsor must submit a sponsor cancellation request.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Lucy Macpherson
Mark Howard
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.