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Corporate Secretarial Practice > Chapter 6: Regulation of Listed Companies > Flashcards

Chapter 6: Regulation of Listed Companies Flashcards

1
Q

What is MAR?

A

Market Abuse Regulation

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2
Q

When did MAR come into effect?

A

July 2016

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3
Q

What are the three offences under MAR?

A

1 Unlawful disclosure
2 Market manipulation
3 Insider dealing

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4
Q

What is market manipulation?

A

Any transactions or behaviour which gives false or misleading signals of supply or demand.

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5
Q

What is insider dealing?

A

Using inside information to deal in securities.

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6
Q

What information must be recorded in an insider list?

A
  • name
  • telephone number (work and personal)
  • company name and address (work and personal)
  • function and reason for being an insider
  • date and time of obtaining/ceasing access to insider information
  • NI number
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7
Q

For how long must insider lists be maintained?

A

5 years from creation or latest update.

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8
Q

What are the two types of insider list?

A

1 Permanent - for those who always have access

2 Project - for those who have access for a limited time

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9
Q

What conditions must be met to justify a delay in releasing insider information?

A
  • does not prejudice issuer’s legitimate interests
  • where the delay will not mislead the public
  • where the issuer can keep the insider information confidential.
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10
Q

What is a PDMR?

A

Person Discharging Managerial Responsibility

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11
Q

What is a connected person?

A

Someone sufficiently close to a PDMR that they can be considered connected.

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12
Q

What is a closed period under MAR?

A

30 days prior to release of a financial statement, during which times PDMRs and connected persons must not deal in securities.

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13
Q

What are the 3 exceptions to the closed period rule?

A
  • severe financial difficulty requiring immediate sale of shares
  • trading under an employee share scheme
  • the transaction has no personal benefit
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14
Q

What is meant by “market soundings”?

A

Seeking the views of a major shareholder prior to announcing a major transaction, in case the holder is likely to oppose the transaction.

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15
Q

Will MAR still apply after Brexit?

A

The UK government have confirmed that MAR will continue to apply post-Brexit.

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16
Q

Did MAR replace the CJA 1993?

A

No, criminal offences related to dealing are still covered by CJA 1993 IN THE uk.

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17
Q

Which law makes insider dealing a criminal offence?

A

CJA 1993 Part V.

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18
Q

What are the three insider dealing offences under CJA 1993 Part V?

A

1 Knowingly dealing in securities on the basis of insider information
2 Encouraging another to engage in such dealing
3 Disclosing inside information otherwise than in the proper performance of one’s employment, office, or profession.

19
Q

What is the role of the FCA?

A

Regulating financial services in the UK, with the overall aim of protecting customers, ensuring the financial services industry remains stable, and promoting healthy competition.

20
Q

What is the role of the Stock Exchange?

A

To provide a regulated primary market and secondary market for securities.

21
Q

What is the difference between and offer for sale and an offer for subscription?

A

An offer for sale related to new or existing securities first acquired by an issuing house and then offered to the public. An offer of sale is direct from the company

22
Q

What is the difference between a placing and a vendor consideration issue?

A

A placing is securities purchased by an issuing house and placed with investment clients. A vendor consideration issue is a of shares to a vendor instead of cash.

23
Q

On which LSE services are FTSE 250 shares usually traded?

A

SETS (Stock Exchange Electronic Trading Service

24
Q

What conditions does a company have to meet to be admitted to the Official List?

A
  • must be duly incorporated and act in accordance with its articles
  • filed audited accounts for the last three years
  • at least 75% of the business covered by a historic revenue-earning record
  • current key executives must have played a significant role in the company’s business
  • must be capable of making decisions independently of any controlling shareholders.
  • shares must be fully paid
  • the first shares listed must have a value of at least £700,000
  • at least 25% of share capital must be in public hands
  • satisfy the FCA that sufficient working capital is available for the next 12 months
25
Q

Who are the main advisers on an issue of shares?

A

The sponsor, usually an investment bank.

26
Q

What is a sponsor?

A

Body that submits an application to list, lodges the supporting documents, and acts as a channel for discussion between the company and UKLA.

27
Q

What is a prospectus?

A

Document containing information about the company and its shares, allowing investors to make an informed decision.

28
Q

What should a prospectus contain?

A
  • details of persons responsible, including auditors and advisers
  • type of share
  • issuer and its capital
  • description of group activities
  • issuer’s assets and liabilities
  • the management
  • the recent development of the group, including risks.
29
Q

Identify the “48-hour” documents.

A

Key documents that must be submitted to the FCA 48 hours before the FCA is to consider an application to become listed:

  • a complete application to the Official List
  • standard application to the LSE
  • prospectus
  • any circular relating to the application
  • copy of the resolution of the board allotting the securities
30
Q

What are the three parts of the prospectus?

A

1 Registration document
2 Securities note
3 Summary

31
Q

What is the purpose of an RIS?

A

A Regulatory Information Service, to which companies must submit announcements.

32
Q

Give 4 examples of the type of information a listed company is required to release. When should it be released?

A
  • information on new developments which could lead to a movement in price
  • any change in expected market performance
  • change in directors
  • issue of accounts
33
Q

What is AIM?

A

The Stock Exchange’s market for smaller plcs.

34
Q

What are the conditions for admission to AIM?

A

Less stringent that a main market admission:
- directors/employees holding more than 0.5% of shares must not dispose of them for one year, if the company is in a business that has not been revenue-earning for the last 2 years

35
Q

Can a private company be admitted to AIM?

A

No, all listed companies must be plcs.

36
Q

Name the key principles of the City Code on Takeovers and Mergers.

A

1 All shareholders must be given equal treatment
2 Shareholders must have enough information to make an informed decision
3 The board must act in the interests of the company as a whole and note deny shareholders a chance to decide for themselves
4 False markets must not be created
5 An offeror must ensure that they can meet any cash consideration in full before announcing a bid
6 An offeree must not be hindered longer than necessary

37
Q

What is the role of the CMA?

A

The Competition and Markets Authority is the body responsible for investigating mergers between two leaders in the same field.

38
Q

Outline the procedure for compulsory acquisition of shares.

A

CA 974-989

  • offerer sends notice than it intends to acquire shares, explaining their rights
  • bidding company acquires the shares at the original offer price
39
Q

Under what circumstances might a scheme of arrangement be appropriate?

A

Where a simple takeover is not possible. e.g. where 100% takeover is desirable, but the required 90% acquisition is not possible.

40
Q

What are the 6 listing rules?

A

1 Ensure directors understand responsibilities
2 Take reasonable steps to comply with obligations
3 Act with integrity toward holders or potential holders
4 Avoid creation of false markets
5 Cooperate with the FCA
6 Premium shares of a class must have equal voting rights

41
Q

How promptly must companies release important information to the market according to the DTRs?

A

As promptly as possible, and at least by the end of the following business day

42
Q

When does the City Code in Takeovers and Mergers apply?

A

Once a bidder increases their shareholding to 30% or higher

43
Q

What resolution is required to approve a scheme of arrangement?

A

75%

44
Q

What are the three market abuse offences?

A

1 Unlawful disclosure
2 Market manipulation
3 Insider dealing

Corporate Secretarial Practice (20 decks)

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