FCA: Primary Market Bulletin 53

On 13 December 2024 the Financial Conduct Authority (FCA) published Primary Market Bulletin 53 (PMB 53) which includes confirmation of the final form of two new, and one amended, sponsor-related technical notes previously consulted on in PMB 50,  and a consultation on various proposed changes to the technical and procedural notes in the FCA’s knowledge base. 

The FCA also highlights its recent consultation on updating references to the UK Corporate Governance Code in the FCA Handbook.

Finalised sponsor-related technical notes consulted on in PMB 50

The FCA has published the final form of three sponsor-related technical notes previously consulted on in PMB 50 (July 2024). These are:

• Sponsors: Record keeping requirements (TN 717): The FCA is updating this note as proposed. It anticipates adding to the Q&A section in future as it identifies further pragmatic steps sponsors can take to make sure record keeping is proportionate and sufficient.
• FCA reviews of sponsor services (TN 723): This new note has been adopted without further amendments. The FCA notes that one industry body commented on the approach to sponsor reviews more generally and asked for better notice and shorter, more thematic reviews. The FCA is considering this feedback as part of developing its supervisory approach to sponsors.
• Responsibilities of a sponsor: specialist due diligence (TN 722). This new note has also been adopted without further amendments. PMB 53 includes a discussion of some of the feedback that the FCA received on this note and its expectations of sponsors in this area. 

Consultation on proposed changes to the Knowledge Base

In PMB 53 the FCA is also consulting on a number of further proposed amendments to its knowledge base, namely:

• Changes to TN 209 (Listing Principle 2 Dealing with the FCA in an open and cooperative manner), including to clarify that Listing Principle 2 also applies where an issuer becomes aware it is no longer able to comply with its continuing obligations under the UKLR.
• Changes to TN 401 (Acquiring assets during investment trust roll-overs), including to add detail on common types of transactions where closed-ended investment funds are acquiring assets by a scheme of reconstruction.
• Combining TN 423 (Open-ended investment companies) and 425 (Open-ended investment management agreements and transfer restrictions) into a single technical note for all open-ended investment company-related topics as well as making certain other amendments, including changes to the section on transfer restrictions to align guidance for UK and non-UK open-ended investment companies.
• The deletion of PN 906 (Passporting) and TN 630 (Choice of home member state under the PD) as these are now obsolete post-Brexit. 
• Proposed consequential changes to a large number of other technical and procedural notes in light of the introduction of the new UK Listing Rules and certain other historic rule changes that have not yet been reflected – these amendments do not affect the substance of the guidance in the relevant notes. 

In light of feedback received, the FCA is also re-consulting on two technical notes previously consulted on in PMB 48 - TN 307 (Aggregating transactions) and TN 710 (Sponsor Services: Principles for Sponsors). 

The consultation closes on 23 January 2025.

(FCA, Primary Market Bulletin 53, 13.12.2024)

Home Office: Government response to House of Lords report on the Modern Slavery Act 2015

On 16 December 2024, the Government published its response to the report on the impact and effectiveness of the Modern Slavery Act 2015 (MSA) published by the House of Lords Select Committee on 16 October 2024. 

The Select Committee report included a number of recommendations which it hoped the Government would take forward “and make the UK world-leading in the battle against modern slavery once again”. In its response, the Government comments that it has considered all the Select Committee’s recommendations and many recommendations “have been accepted and many will be fully considered as the Government develops its policies”. A number of these relate to supply chains. 

Select Committee recommendations relating to supply chains

Among others, the Select Committee made a number of recommendations in relation to supply chains and modern slavery statements. It recommended mandatory publication of such statements in the modern slavery statement registry and creation of an online summary dashboard with information including numbers of statements in total, by sector, and from organisations in scope, and examples of good and bad reporting by companies.

The Select Committee also recommended that there should be increased awareness on the part of companies about supply chains, that the Government should publish standardised and accessible guidance for compliance with section 54 MSA (the section setting out the statutory requirement for in scope companies to publish a modern slavery statement), and that proportionate sanctions for organisations that do not comply with supply chain requirements be introduced.  

Government response to the supply chain recommendations

In response to these particular recommendations, the Government states the following:

• It refers to the Home Office announcement in April 2024 that a number of updates to the modern slavery statement registry had been made to increase the number of statements being uploaded voluntarily and support organisations to publish robust statements, and notes that the Home Office is planning to build on these changes and introduce further improvements.
• The Home Office is currently developing a public facing data dashboard that will provide more data to the public.
• The Home Office is currently working with a wide group of stakeholders from business, academia and civil society to update the section 54 MSA statutory guidance.
• If an organisation fails to comply with the transparency requirement, the Home Secretary can seek an injunction to require compliance but this power has not been used to date due to the cost to the taxpayer of seeking injunctions and the difficulties assessing compliance within the current legislative framework. The Government is reviewing how it can strengthen penalties for non-compliance and create a proportionate enforcement regime. However, this will require legislative change and will be part of a broader move to tackle forced labour and increase transparency in global supply chains. The Government will set out next steps more broadly in due course.
• The Government will assess the best ways to prevent environmental harms, modern slavery and human and labour rights abuses in both private and public sector supply chains, including effective due diligence rules. This will involve consultation with interested stakeholders. 

(Home Office, Government response to House of Lords Modern Slavery Act 2015 Committee, Report of Session 2024-25 The Modern Slavery Act 2015: Becoming World-Leading Again, 16.12.2024)

Treasury: Date of Spring Statement 2025 confirmed

On 16 December 2024, the Chancellor confirmed by way of a Written Statement that the Spring Statement 2025 will be presented to Parliament on 26 March 2025.

TAC: UK endorsement of IFRS Sustainability Disclosure Standards

On 18 December 2024, the Financial Reporting Council, on behalf of the UK Sustainability Disclosure Technical Advisory Committee (TAC), published the TAC’s final recommendations to the Secretary of State for Business and Trade, recommending endorsement of the first two IFRS Sustainability Disclosure Standards for use in the UK.

The two Standards are IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. 

The TAC’s technical assessment of both Standards has concluded that the creation of UK Sustainability Reporting Standards would support long-term public good in the UK.

In advising endorsement, the TAC has also recommended minor amendments to IFRS S1 and IFRS S2. These include extending the 'climate first' reporting relief from one to two years and suggesting that the UK Sustainability Disclosure Policy and Implementation Committee develop guidance on implementing IFRS S1 to clarify how entities can align this standard with existing sustainability-related disclosure requirements under the current UK legal framework.

(UK Sustainability Disclosure Technical Advisory Committee, UK endorsement of IFRS S1 and IFRS S2 – Technical assessment and endorsement recommendations and press release, 18.12.2024)

ISS: Proxy Voting Guidelines 2025

On 17 December 2024, ISS announced the updates to its 2025 Benchmark Proxy Voting Policies for the UK and Ireland which will be applied to shareholder meetings on or after 1 February 2025. ISS consulted on the proposed updates in November 2024. 

The updates reflect several recent changes in regulations and guidelines, including on topics such as remuneration, dilution limits, and board diversity and the policy changes are as follows: 

• Policy clarification regarding the FCA’s requirements in the UK Listing Rules for companies to report against targets related to board diversity, including gender and ethnic diversity. 
• Policy update to remove and replace references to “premium” and “standard” listings in line with the new listing categories under the UK listing regime.
• Policy update regarding remuneration in light of the updated Principles of Remuneration published by the Investment Association (IA) in October 2024 and the changes made in the b2024 UK Corporate Governance Code.
• Policy update to adjust references to share dilution limits applicable to executive discretionary share schemes, acknowledging the updated IA Principles of Remuneration, and providing transparency on investors' expectations regarding best practices. 
• Policy updates to the remuneration applicable to smaller companies, which reflects the increased focus on pay resolutions in the revised QCA Corporate Governance Code, particularly the recommendation that remuneration policies and remuneration reports be presented for advisory shareholder vote.
• Policy update to remove the reference regarding the Capital Requirements Directive limit ratio between variable and fixed remuneration in light of the recent change in UK regulation and the fact that UK banks and investments firms are no longer subject to the variable-to-fixed remuneration cap.

(ISS, Proxy Voting Guidelines – Benchmark Policy Changes for 2025, 17.12.2024)

FCA: Private Intermittent Securities and Capital Exchange System: sandbox arrangements - CP24/29

On 17 December 2024, the Financial Conduct Authority (FCA) published a consultation paper, CP24/29, setting out its proposed regulatory framework for the Private Intermittent Securities and Capital Exchange System (PISCES). See further here.