The Financial Conduct Authority (FCA) has published, as part of its quarterly consultation paper No 49 (CP25/24), a proposed amendment to the notification requirements following a share buyback in the UK Listing Rules (UKLRs). It has also published the findings from its review of share buybacks by UK listed companies.
Consultation on UKLR rule change
The FCA is consulting on a proposed amendment to the requirements in UKLR 9 on notifying purchases following a share buyback.
Companies listed in the equity shares (commercial companies) category or the closed‑ended investment fund category must currently notify a Regulatory Information Service (RIS) as soon as possible when they purchase their own shares, and in any event by no later than 7.30 am on the business day following the calendar day on which the purchase occurred (UKLR 9.6.6R).
Following feedback received during its review of share buybacks (discussed below), the FCA is proposing to amend the notification requirements in light of the potential for overlap between the notifications required by the UKLRs and the requirements under the UK Market Abuse Regulation (UK MAR) where a company is relying on the safe harbour for share buybacks in Article 5, and the requirement to notify the percentage of voting rights a company holds in itself under DTR 5.
The FCA is therefore proposing to amend the notification deadline in UKLR 9.6.6R so that purchases have to be notified by no later than the end of the 7th daily market session following the purchase, bringing it in line with the safe harbour requirements and enabling issuers to notify all purchases made over the course of a week in a single notification.
It is also seeking views more broadly on the proportionality and usefulness of the notification requirements, including in relation to purchases of convertible securities.
FCA review of share buybacks
The FCA's review of share buybacks by UK listed companies had a particular focus on the role of that banks play in conducting them for issuers, but it did not find material concerns about the outcomes banks delivered.
The FCA conducted the review because of the significant growth in buybacks in the UK over the last few years. In the three years post-Covid, they accounted for 42% of the capital returned to shareholders by FTSE 350 issuers, compared to 20% in the three years pre-Covid.
The review looked at two types of buybacks:
- Vanilla buybacks – This is where the issuer gives a bank a periodic or standing instruction to repurchase shares. It may be discretionary, where the issuer keeps full discretion over the daily execution of the buyback, or non-discretionary, where the issuer delegates daily trading decisions to the executing bank. A non-discretionary buyback allows purchases to continue even when the issuer is in a closed period or has inside information under UK MAR; and
- Structured buybacks – These are a type of non-discretionary share buyback where the outcome is tied to a benchmark – being the average price an issuer would achieve if it bought the same number of shares on each day of the buyback, at the daily volume weighted average prices (VWAPs) in the issuer's shares during the buyback's duration. Most, although not all, of the structured products guarantee the issuer a pricing outcome which is generally represented as a discount to the benchmark.
The FCA's conclusions following the review include that:
- while it is optional to comply with the safe harbour requirements for share buybacks under the UK MAR, most banks and issuers conduct buybacks so that they do fall within the safe harbour (for example by making the requisite disclosures to the public, reporting to the regulator and following the limits on price and volume);
- there were no unmanaged conflicts in the way structured buybacks were executed; and
- issuers typically engage with several banks when considering a structured buyback, often including formal processes to compare banks' proposals.
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