FCA: Consultation on new public offers and admission to trading regime – CP 24/12

On 26 July 2024, the Financial Conduct Authority (FCA) published a Consultation Paper, CP24/12,  on the new Public Offers and Admissions to Trading Regulations regime (POATRs) that will replace the UK prospectus regime. More information can be found in our briefing, FCA consultation on reform of the UK prospectus regime: Key takeaways for equity issuers.

FCA: Consultation on new regime for public offer platforms– CP 24/13

On 26 July 2024, the Financial Conduct Authority (FCA) published a Consultation Paper, CP24/13,  on the new regime for public offer platforms that will allow firms to help companies make public offers of securities to investors, including retail consumers. 

The Public Offers and Admissions to Trading Regulations 2024 (POATRs) give the FCA power to set rules around a new regulated activity of operating as a Public Offer Platform (POP).

The Government proposes removing the current requirement for an FCA approved prospectus to be published for offers of transferable securities with a total consideration of more than €8 million. Instead, it will be possible for securities to be offered to the public in reliance upon a number of exemptions, including an exemption for public offers where the total value of the offer exceeds £5 million, subject to that offer being made on a POP. POPs will therefore be used by issuers who seek to make public offers of unlisted securities where the value of the offer exceeds £5 million.

There are currently 27 crowdfunding platforms and 462 corporate finance firms operating in the UK, which may consider taking up the permission to operate a POP.

The proposed new rules and guidance in CP24/13 will create a due diligence and disclosure framework for POP operators and issuers. As set out in CP24/13 the FCA is proposing rules regarding:

• Due diligence to be performed by platforms when onboarding companies and assessing the securities to be offered.
• Information and disclosures designed to inform investors of the key features and risks associated with offers of ‘off market’ securities, typically by smaller companies.
• Liability on POP operators.

The FCA is also applying the Consumer Duty and appropriate authorisation requirements from the FCA Handbook.

As for more bespoke rules specific to operating a POP, the FCA’s proposals focus on three key areas:

• Information gathering and due diligence carried out by POPs on prospective issuers and the securities being offered.
• The specific disclosures provided to investors on an issuer and the security being offered.
• The application of liability and redress in relation to the content of offers facilitated by POPs.

Therefore, POP operators will have a key gatekeeping role in deciding if a public offer should be made to investors.

The deadline for comments on CP24/13 is 18 October 2024.

(FCA, CP24/13, Consultation on new regime for public offer platforms, 26.07.2024)

FCA: New rules on payment optionality for investment research – PS24/9

On 26 July 2024, the Financial Conduct Authority (FCA) published a Policy Statement PS24/9 which sets out final rules for a new option to pay for investment research and sets out its feedback to its earlier consultation in CP24/7.

The new option, which facilitates joint payments by firms such as asset managers for third-party research and execution services if the firm meets the requirements relating to the operation of these, will exist alongside those already available, i.e. payments for research from a firm’s own resources and payment for research from a research payment account for specific clients. The FCA is not seeking changing the existing rules on these other payment options.

The FCA notes that whilst there was strong support for the new joint payment option there were concerns regarding the precise specification of certain of the guardrails which has prompted the FCA to make certain changes to its original proposals. A summary of these changes is in paragraph1.23 of PS24/9.

A summary list of the key requirements introduced by the new rules are found in paragraphs 1.19 to 1.22.

The changes to the research rules will come into force on 1 August 2024.

The FCA notes that it is aware that the changes it is making in PS24/9 should also apply to fund managers, including UCITS managers and alternative investment fund managers under COBS 18. 

The FCA plans to set out the necessary rule changes to achieve this alignment in a future consultation in the autumn. The FCA’s intention is to make the same option available in substance, and it will consider technical aspects of how best to achieve this in practice.

(FCA, PS24/9, Payment optionality for investment research, 26.07.2024)

Companies House: Annual report and accounts 2023-2024

On 30 July 2024, Companies House published its annual report and accounts for the period 1 April 2023 to 31 March 2024. Among other things, the report comments on recent corporate transparency and register reform, as well as the late filing penalty and civil sanctions regimes available to the Registrar of Companies.

In Section 1 of the report, covering performance, there is commentary on the corporate transparency and register reform introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023). 

The report notes that ECCTA 2023 amends the Companies Act 2006 to reform Companies House’s processes and furnish the Registrars of Companies with new statutory functions and objectives, noting that the Registrars are now tasked with doing more to protect the integrity of the information on the register and seeking to prevent companies and others from carrying out unlawful activities. To support this ECCTA 2023 equips them with new powers, including powers to query suspicious appointments or filings, request further evidence or reject filings.

It comments that a significant programme of secondary legislation is necessary to implement the reforms and estimates that some 50 or more statutory instruments are likely to be needed to underpin all aspects of the operational roll-out. It states that the Government intends to deliver these instruments in phases, designed to be closely aligned with the extensive operational transformation within Companies House. 

Section 4 of the annual report looks at the exercise of the late filing penalties (LFP) regime and the new civil sanctions (financial penalties) regime introduced by the Economic Crime (Transparency and Enforcement) Act 2022 and ECCTA 2023. In that section, the report comments on the use of those powers and the factors taken into account in determining the amount of a financial penalty to be imposed, as well as providing figures on penalties imposed in the period. 

(Companies House, Annual Report 2023-2024, 30.07.2024)

Parker Review: FAQs on the extension of scope to encompass senior management – Guidance

In July 2024, the Parker Review Committee published guidance, in the form of Frequently Asked Questions (FAQs), on the extension of scope to encompass senior management announced in the March 2023 Parker Review Report, in preparation for reporting in December 2024.

The introduction to the FAQs states that senior management targets for ethnic diversity have been introduced to encourage companies to build their internal pipeline of ethnic minority talent and the purposes of these FAQs is to guide and support companies’ progress on this important topic.

The FAQs cover a range of questions including the following:

Are we obliged to use the definition of ‘senior management’ set by the Parker Review?

For the purposes of reporting to the Parker Review, companies are encouraged to align their definition with the Parker Review’s for consistent comparison. However, if this is not possible or does not suit the company, it is permissible for it to use its own definition. In such cases, companies should alert the Parker Review Committee that they are using a different definition and to provide a brief explanation in their Annual Report of the definition used.

Our company has individuals who directly report into our Executive Committee who are not in senior management roles. Should we include these individuals in our targets? 

The Parker Review seeks above all to increase the diversity of those in positions of greatest influence in business. For the purposes of the Parker Review, companies should only include the members of their Executive Committee (or equivalent body) and any direct reports who would be regarded as senior managers. Companies should not include individuals who are not in senior management roles.

Our company already has a target set to be achieved by a date before 2027/beyond 2027. How should we respond to the request to meet our target by 2027? 

Companies with targets already set to be achieved before 2027 are encouraged to meet these as a first step. For those companies, for the purposes of making a submission on senior management to the Parker Review in December 2024 (which is a private submission), they are encouraged to set and report a further target to be achieved in 2027. For companies with targets already in place for a date beyond 2027, for the purposes of making a submission on senior management to the Parker Review in December 2024, they are encouraged to consider setting an interim target for 2027 which can be reported to the Parker Review Committee.

We are a global business. Many of our senior managers and directors overseas are not of an ethnic minority in their context. Should we report these individuals as ethnic minorities in the survey? 

The Parker Review Committee does not believe that it is within the scope of the Review to provide guidance on the broader question of ethnicity in a global context. However, it recognises that companies with a global footprint may already set and report ethnicity targets from a global perspective and so will provide these companies with the opportunity also to report these targets.

It is illegal to ask for the ethnicity of our employees in one or more of our global offices. How should we approach this? 

In contexts where asking an individual for their specific ethnicity is not permissible, the Parker Review Committee suggests that companies seek to understand whether they are able to ask a different question instead, and work with their local teams and legal counsel to determine an alternative approach. Where such an alternative approach is not possible, companies should declare a proportion of ‘unknown’ ethnicities, separate from those who choose to report ‘prefer not to say.’

(Parker Review Committee, FAQs on the extension of scope to encompass senior management – Guidance, 31.07.2024)