Listed Companies

Question 1

The term ‘IPO’ means…

Introducing Premium Offer

Initial Present Offering

Introduction to Public Offer

Initial Public Offering

Answer 1

Initial Public Offering

Correct

Question 2

A private company wishing to offer its shares to the public must first re-register as a public company under…

s. 90 CA 2006

Listing Rule 2.2.4.

s. 755 CA 2006

s. 756 CA 2006

Answer 2

s. 90 CA 2006

correct

Question 3

An IPO is a way of gaining an injection of cash into a company and will…

…prevent the company from having to file accounts

…prevent the company from having to borrow any money.

…provide a market for the shares.

…increase its customers.

Answer 3

…provide a market for the shares.

correct

Question 4

On an IPO, an investment bank heads up the team of advisers and will…

…advise the company on the structure of the IPO.

…draft the prospectus.

…produce the long-form financial report.

…act as the Registrar on the IPO.

Answer 4

…advise the company on the structure of the IPO.

correct

Question 5

On an IPO, a corporate broker will…

…provide various comfort letters.

…provide various comfort letters.

…draft the prospectus.

…act as agents for clients who want to buy or sell shares.

Answer 5

…act as agents for clients who want to buy or sell shares.

Correct

Question 6

On an IPO, the lawyers will be involved in…

…selling the shares.

…preparing legal due diligence, drafting large parts of the prospectus and assisting with verifying its contents.

…producing the long-form financial report.

…acting as registrar.

Answer 6

…preparing legal due diligence, drafting large parts of the prospectus and assisting with verifying its contents.

Correct

Question 7

In order to make an application to list on the premium segment of the Main Market of the LSE a company…

…can be a newly incorporated company.

…must have been incorporated and have a filing history covering at least 3 years.

…must have been incorporated and have a filing history covering at least 1 year.

…must have been incorporated and have a filing history covering at least 5 years.

Answer 7

…must have been incorporated and have a filing history covering at least 3 years.

correct

Question 8

Under the Listing Rules a company wanting to make an application to list on the Main Market of the LSE must have a minimum market capitalisation of…

£30 million

£50 million

£700,000

£300,000

Answer 8

£30 million

correct

Question 9

Prior to listing, a company must ensure that the settlement and transfer of its shares can be made via…

…AIM.

…Stock Transfer Form.

…CREST.

…the LSE.

Answer 9

…CREST.

correct

Question 10

Under the Listing Rules and the UK Corporate Governance Code, the positions of Chair and Chief Executive…

…should always be held by the same person at the same time without any explanation being necessary to keep shareholders happy.

…can be held by the same person at the same time if the reason is explained to shareholders in the company’s Annual Report and Accounts.

…should ideally be held by the same person at the same time.

…should never held by the same person at the same time.

Answer 10

…can be held by the same person at the same time if the reason is explained to shareholders in the company’s Annual Report and Accounts.

correct

incorrect
…should never held by the same person at the same time.

Incorrect - have another look at Provision 11 of the UK Corporate Governance Code and LR 9.8.6R (5) and (6). It is preferable to divide the roles of Chair and Chief Executive but as with all the provisions of the UK Corporate Governance Code it is subject to the “comply or explain” rule.

Question 11

Under the Listing Rules and the UK Corporate Governance Code, which committee(s) is/are compulsory?

Remuneration committee

All of them.

Audit committee

Nomination committee

Answer 11

audit committee
correct

Incorrect
all of them

Incorrect – have another look at the provisions of Principle M, Provision 24 and the overlap with DTR 7.1.

Question 12

In accordance with the UK Corporate Governance Code, if a company has a total of six directors (excluding the Chair), how many of those six should be independent non-executive directors?

6

3

4

2

Answer 12

3

correct

Question 13

Company plc (‘Company’) was incorporated last November. Company is offering new shares by way of a placing to qualified investors only. Company is preparing to apply to have its shares listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange by the end of the financial year (‘Admission Date’).

On the basis of the above information, which one of the following statements is correct?

Company will not be able to submit an application to list as it has not been trading for three years prior to the Admission Date.

Company would need a minimum market capitalisation of £10 million.

Company will not be able to list unless its company secretary has been qualified as a solicitor for three years.

Company must ensure that a minimum of 30% of the shares in Company are held in ‘public hands’ at the time of Admission.

Answer 13

Company will not be able to submit an application to list as it has not been trading for three years prior to the Admission Date.

Correct! LR 6.2.1

Question 14

Company plc (‘Company’) is preparing to apply to have its shares listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company was incorporated 4 years ago. Company has an issued share capital of 25 million ordinary shares of £1 each (‘Shares’) owned by family members. Company is offering £20m new Shares to new institutional investors as part of the float. The Shares will be marketed at 300p each.

On the basis of the above information, which one of the following statements is CORRECT?

Company needs to have at least a 5-year trading history to join the Main Market of the London Stock Exchange.

On the float, Company will have enough market capitalisation to join the Main Market of the London Stock Exchange

Company will not have enough shares in ‘public hands’ at the time of admission.

Company would need to issue shares at a minimum of 500p each per share to join the Main Market of the London Stock Exchange

Answer 14

On the float, Company will have enough market capitalisation to join the Main Market of the London Stock Exchange

Correct! LR 2.2.7

Question 15

Company plc (‘Company’) is preparing to apply to have its shares listed on the to list on the premium segment of the Official List and admitted to trading on the Main Market of the London Stock Exchange (‘LSE’) for the first time. The current board of Company has four executive directors, one Chair and zero non-executive directors.

On the basis of the above information, which one of the following statements is CORRECT?

Once admitted to trading on the LSE, the board of Company can decide whether to appoint an audit committee.

To be listed on the Official List and admitted to trading on the Main Market of the LSE, Company would need to appoint a sponsor.

Once admitted to trading on the LSE, Company would have six months to achieve a minimum market capitalisation of £30 million.

To be listed on the Official List and admitted to trading on the Main Market of the LSE, Company would need to appoint five independent non- executive directors.

Answer 15

To be listed on the Official List and admitted to trading on the Main Market of the LSE, Company would need to appoint a sponsor.

correct

incorrect
To be listed on the Official List and admitted to trading on the Main Market of the LSE, Company would need to appoint five independent non- executive directors.

Incorrect
Incorrect. See UK CGC Provision 11.

Question 16

Research reports are produced in advance of an IPO in order to…

…provide an independent view (including forecasts) of the business and prospects of a listed company.

…recommend shares in other companies that investors should buy.

…assist colleagues acting on the IPO.

…provide the directors of the company with some information to help their families invest.

Answer 16

…provide an independent view (including forecasts) of the business and prospects of a listed company.

correct

Question 17

‘Connected analysts’ are…

…independent research analysts, who do not have a connection to any of the advisers to the issuer.

…research analysts who are employed by the issuer.

…analysts who are employed in the same group as the brokers, investment advisers and underwriters who are acting for the issuer but are employed by the issuer.

…analysts who are employed in the same group as the brokers, investment advisers and underwriters who are acting for the issuer but are independent of the issuer.

Answer 17

…analysts who are employed in the same group as the brokers, investment advisers and underwriters who are acting for the issuer but are independent of the issuer.

Correct

Question 18

A key provision in the Conduct of Business sourcebook (the “COBS”) in relation to how analysts must carry on their business of producing research is…

…that research on an applicant in an IPO must be disseminated by analysts 7 days before the applicant has published either a prospectus or a registration document that has been approved by the FCA.

…that no research on an applicant in an IPO may be disseminated by analysts until a specified time period of 7 days has elapsed after the applicant has published either a prospectus or a registration document that has been approved by the FCA.

…that independent research must be made available at the same time as the applicant has published either a prospectus or a registration document that has been approved by the FCA.

…that the analyst must fully copy the information provided about the company in the Analysts Presentation by the directors.

Answer 18

…that no research on an applicant in an IPO may be disseminated by analysts until a specified time period of 7 days has elapsed after the applicant has published either a prospectus or a registration document that has been approved by the FCA.

correct

Question 19

A ‘retail offer’ is an offer of shares to…

…retail or ‘general’ public shareholders.

…independent research analysts.

…professional investors only, such as investment banks.

…all shareholders via an online market.

Answer 19

…retail or ‘general’ public shareholders.

correct

Question 20

A ‘Placing’ is a …

…marketing of listed securities already in issue to specified directors of the issuer which does not involve an offer to the public or to existing holders of the issuer’s securities generally

…marketing only of listed securities already in issue to professional investors.

…marketing of securities already in issue but not listed or not yet in issue, to specified persons or clients of the sponsor or any securities house assisting in the placing, which does not involve an offer to the public or to existing holders of the issuer’s securities generally.

…marketing of listed securities listed an offer to existing shareholders to purchase further shares pro rata / in proportion to their existing holdings.

Answer 20

…marketing of securities already in issue but not listed or not yet in issue, to specified persons or clients of the sponsor or any securities house assisting in the placing, which does not involve an offer to the public or to existing holders of the issuer’s securities generally.

Correct

Question 21

An ‘introduction’…

…introduces the issuer to competitors on AIM.

…is a way of obtaining a listing by issuing only new shares.

…does not raise any capital for the issuer.

…is a way of obtaining a listing by selling existing shares.

Answer 21

…does not raise any capital for the issuer.

correct

Question 22

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company wishes to launch an offer for shares to institutional investors with a retail element. When does formal bookbuilding commence?

Immediately after the announcement to the market of the Confirmation of Intention to Float.

Prior to launch day, before the final price-range prospectus has been approved by the FCA and published.

On launch day after the price-range prospectus has been approved by the FCA and published

On launch day after publication of the pathfinder.

Answer 22

On launch day after the price-range prospectus has been approved by the FCA and published

correct

Question 23

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company wishes to launch an offer for shares to institutional investors with a retail element. By when does the draft prospectus need to be submitted to approval to the FCA?

At least 10 working days before the intended approval date.

At least 48 hours prior to the intended approval date.

At least 20 working days before the intended approval date.

At least 20 days before the intended approval date.

Answer 23

At least 20 working days before the intended approval date.

correct

Question 24

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. What happens on Admission Day?

The hearing for admission takes place.

Trading in the shares commences.

Bookbuilding commences.

The prospectus is published.

Answer 24

Trading in the shares commences.

correct

Question 25

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company wishes to only sell shares to institutional investors. What document is likely to be used to market the shares prior to admission?

Fixed price prospectus

Price-range prospectus

Pathfinder

Pricing Statement

Answer 25

Pathfinder

correct

Question 26

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company wishes to sell shares to both institutional and retail investors. What document is likely to be used to market the shares?

Pricing Statement

Fixed price prospectus

Price-range prospectus

Pathfinder – this is used on an Institutional offer.

Answer 26

Price-range prospectus

correct

Question 27

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company wishes to offer shares to both institutional and retail investors. How long in advance does the offer need to be open for?

The offer must be open for at least 48 hours from the date the prospectus is made available to the public before it can be closed.

The offer does not need to be open to the public as a pathfinder would have been used.

The offer must be open for at least six days from the date the prospectus is made available to the public before it can be closed.

The offer must be open for at least six working days from the date the prospectus is made available to the public before it can be closed.

Answer 27

The offer must be open for at least six working days from the date the prospectus is made available to the public before it can be closed.

correct

Look at PRR 3.2.1/Art 21(1) UK Prospectus Regulation

Question 28

‘Underwriting’ is used on an IPO to…

…set the price for the shares by obtaining indicative bids from investors to acquire specified numbers of shares.

…insure all the shares on a float are subscribed for if other investors cannot be found or if they fail to pay.

…sell any surplus shares on the market.

…keep a record and take payments for the shares from the subscribers.

Answer 28

…insure all the shares on a float are subscribed for if other investors cannot be found or if they fail to pay.

correct

Question 29

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. The prospectus has been approved and made available to the public. Admission is expected to take place in 2 weeks’ time. Today a significant new factor regarding Company comes to light. What should Company do?

Ignore the new factor as the current prospectus has already been approved.

Wait until after Admission to produce a supplementary prospectus.

Produce a supplementary prospectus in the next few days.

Bring forward the Admission date.

Answer 29

Produce a supplementary prospectus in the next few days.

correct

Question 30

An offer of shares in more than one country is often called….

…a global offer.

…a world offer.

…a diverse offer.

…a universal offer.

Answer 30

…a global offer.

correct

Question 31

An ‘offer of transferable securities to the public’ for the purposes of Test 1 is defined…

…as any communication giving some detail about a potential float.

…under s.102A FSMA

…very widely and can cover any form of communication, by any means.

…very narrowly and does not cover offers to institutional investors.

Answer 31

…very widely and can cover any form of communication, by any means.

correct

Question 32

The following is a ‘regulated market’ for the purposes of TEST 2.

PSM.

The Main Market of the London Stock Exchange.

CREST.

AIM.

Answer 32

The Main Market of the London Stock Exchange.

correct

Question 33

Company plc (‘Company’) is considering making an application to have its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company will only be offering shares to institutional investors.

Which of the following statements is correct?

Company will not need to produce a prospectus as it has an exemption under Test 1.

Company will need to produce a prospectus as no exemptions are available on an institutional offer.

Company will not need to produce a prospectus as it has exemptions under both Test 1 and Test 2.

Company will need to produce a prospectus as it has no exemption under Test 2.

Answer 33

Company will need to produce a prospectus as it has no exemption under Test 2.

correct

Question 34

On an IPO (a primary issue), due diligence will be required to…

…give all the necessary information to the Registrar

…ensure the prospective shareholder will not be liable for their share purchases

…ascertain the necessary information for inclusion in the prospectus

…produce a report to made available to prospective shareholders

Answer 34

…ascertain the necessary information for inclusion in the prospectus

correct

Question 35

On an IPO (a primary issue), a ‘long form report’ is prepared by the Reporting Accountants and is required to…

…be approved by the FCA

…to be made available to prospective shareholders in the prospectus

…give a detailed review of the company’s financial position to the company itself

…be addressed to and approved by the company’s sponsor

Answer 35

…give a detailed review of the company’s financial position to the company itself

correct

Question 36

On an IPO, the working capital report will be prepared by the…

Reporting accountants

Directors

Sponsor

Lawyers

Answer 36

Reporting accountants

correct

Question 37

A prospectus may be drawn up as…

…as a single document only.

…a registration document and a securities note.

…a single document or as four separate documents.

…a single document or as three separate documents.

Answer 37

…a single document or as three separate documents.

Correct

Question 38

When a prospectus is drawn up as a single document on an IPO, it must contain the following elements in the following order:

A summary (where required), risk factors and any other information referred to in the Annexes to the UK PR Regulation.

A table of contents, a summary (where required), risk factors and any other information referred to in the Annexes to the UK PR Regulation.

Risk factors, a table of contents and a summary (where required).

A table of contents, a registration document, a summary and any other information referred to in Annex 1 to the UK PR Regulation.

Answer 38

A table of contents, a summary (where required), risk factors and any other information referred to in the Annexes to the UK PR Regulation.

correct

Question 39

When a prospectus is drawn up on an IPO, the directors must ensure the following in relation to disclosure:

that a prospectus must contain the ‘necessary information’ as required by the registration document.

that a prospectus must contain all the ‘necessary information’ as required by the registration document, the securities note, and the information required by the relevant Annexes.

that a prospectus must contain the ‘necessary information’ which is material to an investor for making an informed assessment of the assets and liabilities and profits and losses, financial position and prospects of the issuer.

that a prospectus must contain the ‘necessary information’ as required by the summary, registration document and securities note.

Answer 39

that a prospectus must contain the ‘necessary information’ which is material to an investor for making an informed assessment of the assets and liabilities and profits and losses, financial position and prospects of the issuer.

correct
PRR 2.1.1/Art. 6(1), UK Prospectus Regulation

Question 40

Company plc (‘Company’) is an unlisted company incorporated in England and Wales. Company is considering applying to have its shares listed for the first time on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company is issuing £200m of new ordinary shares by way of a placing to institutional investors only.

On the basis of the above information, which one of the following statements is CORRECT?

Company will have an exemption to Test 1 and will therefore not need to produce a prospectus.

Company will have an exemption to both Test 1 and Test 2 and will therefore not need to produce a prospectus.

Company will need to produce a prospectus.

Company will not need to produce a prospectus as they are offering the shares by way of a placing.

Answer 40

Company will need to produce a prospectus.

correct

Question 41

Company X plc (‘Company X’) is an unlisted company incorporated in England and Wales. Company X is considering applying to have its shares listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange for the first time. Company X wishes to sell shares to both institutional and retail investors.

On the basis of the above information, which one of the following statements is CORRECT?

A pathfinder prospectus will need to be available at least 6 working days prior to the close of the offer.

A price-range prospectus will need to be available at least 48 hours prior to the close of the offer.

A price-range prospectus will need to be available at least 6 working days prior to the close of the offer.

A fixed price prospectus will need to be available at least 2 working days prior to the close of the offer.

Answer 41

A price-range prospectus will need to be available at least 6 working days prior to the close of the offer.

correct

Question 42

Company Y plc (‘Company Y ’) is an unlisted company incorporated in England and Wales. Company Y is considering applying to have its shares listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange for the first time.

On the basis of the above information, which one of the following statements is CORRECT?

Company Y must submit to the FCA various documents (including a copy of its approved prospectus and its completed application for listing) by midday ten business days prior to the hearing at which the FCA considers Company’s listing application

Company Y need not submit a prospectus to the FCA for approval if a registration document or a pathfinder has been using for bookbuilding.

Company Y must submit its prospectus to the FCA for approval at least 10 working days before publication of the prospectus.

Company Y must submit its prospectus to the FCA for approval at least 20 working days before publication of the prospectus.

Answer 42

Company Y must submit its prospectus to the FCA for approval at least 20 working days before publication of the prospectus.

Correct
Correct! PRR 3.1.6(2)(b)

Question 43

What section of the Financial Services and Markets Act 2000 (‘FSMA’) contains a general prohibition on all types of financial promotion?

s.30 FSMA

s.21 FSMA

s.123 FSMA

s.25 FSMA

Answer 43

s.21 FSMA

correct

Question 44

Breach of s. 21 FSMA is a…

…criminal offence punishable by a maximum of 7 years’ imprisonment (six months on summary conviction) or an unlimited fine or both.

…civil offence punishable by an unlimited fine.

…civil offence punishable by a maximum of 2 years’ imprisonment (six months on summary conviction) or an unlimited fine or both.

…criminal offence punishable by a maximum of 2 years’ imprisonment (six months on summary conviction) or an unlimited fine or both.

Answer 44

…criminal offence punishable by a maximum of 2 years’ imprisonment (six months on summary conviction) or an unlimited fine or both.

Correct

Question 45

The following is a key exemption from the restriction contained in s 21 FSMA set out in the Financial Promotions Order (‘FPO’):

Communications made to persons sufficiently expert to understand the risks involved such as business investors.

Communications made to directors of a listed company.

Communications made to existing shareholders of a listed company.

Communications made to persons who are qualified company secretaries.

Answer 45

Communications made to persons sufficiently expert to understand the risks involved such as business investors.

correct

Question 46

Under the Prospectus Regulation Rules (‘PRRs’), advertisements must contain a number of disclaimers and warnings and must…

…be clearly recognisable as an advertisement and include the word ‘advertisement’ in a prominent manner.

…be in the same format and length as the prospectus.

…recommend that potential investors read the summary of the prospectus before making an investment decision in order to fully understand the potential risks and rewards of investment.

…state that a prospectus will be published and that investors should search the internet to obtain it.

Answer 46

…be clearly recognisable as an advertisement and include the word ‘advertisement’ in a prominent manner.

correct

Question 47

All information disclosed in an advertisement in oral or written form concerning an offer must also…

…be similar to any such information contained in the prospectus.

…be consistent and any such information (whether in an advertisement or not) and must not contradict the information contained in the prospectus.

…be identical to any such information contained in the prospectus.

…be in exactly the same format, font and style as any such information contained in the prospectus.

Answer 47

…be consistent and any such information (whether in an advertisement or not) and must not contradict the information contained in the prospectus.

correct

Question 48

A breach of the Prospectus Regulation Rules (‘PRRs’) relating to advertisements would allow the FCA to impose sanctions under the following section:

s. 91 Financial Services Act

s.87K FSMA

s.90 FSMA

s. 91 FSMA

Answer 48

s. 91 FSMA

Correct

Question 49

S.90 FSMA allows for compensation for false or misleading statements or omissions. What type of offence is this?

Summary offence

Civil offence

Criminal offence

Misrepresentation

Answer 49

Civil offence

correct

Question 50

Company plc (‘Company’) whose shares were admitted to listing on the Official List and admitted to trading on the Main Market of the London Stock Exchange last week, has just discovered that judgment has been entered against Company in relation to a breach of contract claim (the ‘Claim’).

The Claim is substantial and is likely to be successful. The directors of Company knew this prior to admission but chose not to include details about the Claim in the original prospectus.

Which of the following statements is CORRECT?

The directors of Company are unlikely to have any defences available to them under Schedule 10 of the Financial Services and Markets Act 2000

The directors of Company should now prepare a supplementary prospectus in order to avoid any liability to investors under s.90 Financial Services and Markets Act 2000.

The directors of Company will always have a defence available to them under Schedule 10 Financial Services and Markets Act 2000

The information about the Claim did not need to be disclosed in the original prospectus.

Answer 50

The directors of Company are unlikely to have any defences available to them under Schedule 10 of the Financial Services and Markets Act 2000

correct

Question 51

Persons who may likely be ‘responsible’ for a prospectus under the Prospectus Regulation Rules (‘PRRs’) include:

the directors, the sponsor, the investment bank and each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus.

the issuer, the directors and each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus.

the directors, the sponsor, the lawyers and each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus.

the issuer, the directors, the sponsor and each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus.

Answer 51

the issuer, the directors and each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus.

correct

Question 52

The following are examples of potential civil claims:

Negligent misstatement, fraud by false representation, breach of contract, misrepresentation and market manipulation.

Negligent misstatement, breach of contract, misrepresentation and making a statement, promise or forecast known to be misleading, false or deceptive.

Fraud by failing to disclose information and market manipulation.

Negligent misstatement, breach of contract, misrepresentation and market manipulation.

Answer 52

Negligent misstatement, breach of contract, misrepresentation and market manipulation.

correct

Question 53

TheSponsor has specific obligations to the FCA under LR 8. On the day of approval of a company’s IPO prospectus, the sponsor must submit the following document(s) to the FCA:

Sponsor’s declaration on an application for listing.

Due diligence report and verification notes.

Prospectus and Analyst Reports.

Registration document and application for listing.

Answer 53

Sponsor’s declaration on an application for listing.

correct

Question 54

The FCA may take specific enforcement action against a sponsor (such as imposing a financial penalty) that breaches certain Listing Rules requirements in relation to the provision of sponsor services under which section of FSMA?

s.91 FSMA

S.90 FSMA

s.88A FSMA

s.89 FSMA

Answer 54

s.88A FSMA

correct

Question 55

A registration document…

…should contain the minimum disclosure requirements set out in Annex 1.

…if found to be incorrect, it should be amended which will then trigger withdrawal rights.

…does not need to be verified

…is part of a prospectus so will need to be approved by the FCA.

Answer 55

…should contain the minimum disclosure requirements set out in Annex 1.

correct

Question 56

Verification is used to check the accuracy of statements in the prospectus and to ensure …

…that nothing has been omitted from the prospectus which is required to be disclosed under the general disclosure obligations.

…that the prospectus will automatically be approved by the FCA.

…there will be no liability for the company under s.90 FSMA

…that none of the directors will be liable.

Answer 56

…that nothing has been omitted from the prospectus which is required to be disclosed under the general disclosure obligations.

correct

Question 57

Verification questions need to test…

…the knowledge of the company’s directors.

…the factual knowledge of the company’s advisers.

…the factual accuracy of statements in the prospectus.

…the potential liability cost of an inaccurate statement.

Answer 57

…the factual accuracy of statements in the prospectus.

correct

Question 58

In verifying a statement of fact in a prospectus the following evidence could be used:

A letter stating a director’s opinion.

An opinion from the company’s key shareholders.

A report from the company’s solicitors.

A third party expert’s report.

Answer 58

A third party expert’s report.

correct

Question 59

A supplementary prospectus must be approved by the FCA in a maximum of what number of working days from the discovery of the fact which triggers such supplementary prospectus?

Five working days.

Twenty working days.

Three working days.

Ten working days.

Answer 59

Five working days.

correct

Question 60

How many days does a person who has accepted a public offer of shares under the original prospectus have to withdraw their acceptance after the publication of a supplementary prospectus?

Two working days.

Three working days.

Ten working days.

Five working days.

Answer 60

Two working days.

correct

Question 61

Any person responsible for a prospectus who is aware of any new factor, mistake or inaccuracy that may require the submission of a supplementary prospectus must give notice of it to the following parties:

the issuer and all the company’s advisers.

the directors and all the shareholders.

the issuer, the sponsor and all the shareholders.

the issuer and the sponsor.

Answer 61

the issuer and the sponsor.

correct

Question 62

Company Limited (‘Company’) is a private limited company incorporated in England and Wales. Company is preparing to re-register as a public limited company and have its shares listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company is planning to issue £200m of new ordinary £1 shares by way of a placing to institutional investors only and is currently preparing its listing documentation.

On the basis of the above information, which one of the following statements is CORRECT?

Company will likely use a price-range prospectus and a pricing statement to market its shares.

Company’s prospectus must contain a responsibility statement confirming that the Company, its directors, legal advisers and sponsors are all persons responsible for the content of the prospectus.

Company will likely use a pathfinder to market the shares.

Under s. 90 FSMA, a Company can omit any information from the prospectus that would be contrary to its interests.

Answer 62

Company will likely use a pathfinder to market the shares.

Correct!

Question 63

Company plc (‘Company’) is a business whose shares were admitted to listing on the Official List and admitted to trading on the Main Market of the London Stock Exchange last week.

One of Company’s directors has just discovered that judgment has been entered into against Company in relation to a substantial breach of contract claim (the ‘Claim’). Company has been advised by its current lawyers that there is no realistic possibility of appealing the Claim. Company originally received advice from a different firm of lawyers that the Claim was highly unlikely to be successful and that details of the Claim would not need to be included in its prospectus. There was no mention of the Claim in the original prospectus.

On the basis of the above information, which one of the following statements is CORRECT?

The information about the Claim should have been disclosed in the original prospectus to comply with the disclosure requirements set out in s.90 of the Financial Services and Markets Act 2000.

The directors of Company are unlikely to have any defences available under schedule 10 of the Financial Services and Markets Act 2000.

Company should make a market announcement through an RIS about the Claim.

The directors of Company should prepare a supplementary prospectus in order to avoid all liability to investors under s.90 of the Financial Services and Markets Act 2000

Answer 63

Company should make a market announcement through an RIS about the Claim.

Correct
Correct!

incorrect
The directors of Company should prepare a supplementary prospectus in order to avoid all liability to investors under s.90 of the Financial Services and Markets Act 2000

Incorrect
Incorrect – have another look at s.90 and schedule 10 FSMA.

Question 64

Company plc (‘Company’) is preparing to list on the Official List and to be admitted to trading on the Main Market of the London Stock Exchange. Its prospectus was published last week, and it is anticipated that the shares will be admitted to listing and trading in one weeks’ time. One of the directors of Company has just become aware that they have lost a major client who is now threatening to sue Company.

On the basis of the above information, which one of the following statements is CORRECT?

Company must submit a supplementary prospectus for approval in the next 20 working days.

Company should prepare a supplementary prospectus for approval by the FCA.

Company cannot issue a supplementary prospectus as the relevant period for doing so has lapsed.

If the directors of Company reasonably believe that the claim is unlikely to succeed, there will be no need to produce a supplementary prospectus.

Answer 64

Company should prepare a supplementary prospectus for approval by the FCA.

Correct

incorrect
Company cannot issue a supplementary prospectus as the relevant period for doing so has lapsed.

Incorrect – the shares will be admitted in one weeks’ time. Have another look at PRR 3.4.

Question 65

Please complete the following sentence:

A Class 1 transaction occurs where a listed company is planning to purchase or dispose of an asset outside the ordinary course of business where the asset being purchased or disposed of is worth [x] or more of the size of the listed company. What is [x]?

15%

20%

5%

25%

Answer 65

25%

correct

Question 66

A large related party transaction (any percentage ratio is 5% or more) will require the following documentation:

a fair and reasonable statement from an independent advisor and an RIS announcement.

an RIS announcement and circular (including a fair and reasonable statement) only.

an RIS announcement; circular (including a fair and reasonable statement) and shareholder approval.

a fair and reasonable statement from an independent advisor and a circular.

Answer 66

an RIS announcement; circular (including a fair and reasonable statement) and shareholder approval.

correct

Question 67

If a company has failed to meet its continuing obligations for listing, the FCA can…

…subject the directors to a custodial sentence.

…request that the board of the issuer resign.

…impose a maximum fine of £50,000 on each director of the company.

…publish a statement censuring the issuer or one or more directors of the company.

Answer 67

…publish a statement censuring the issuer or one or more directors of the company.

correct

Question 68

When is public company required to hold a general meeting as its annual general meeting (‘AGM’)?

In each period of six months prior to its accounting reference date.

In each period of nine months beginning with the day following its accounting reference date.

In each period of 12 months beginning with the day following its accounting reference date.

In each period of six months beginning with the day following its accounting reference date.

Answer 68

In each period of six months beginning with the day following its accounting reference date.

correct

Question 69

A company’s remuneration policy must be put to a shareholder vote by ordinary resolution. This must be done:

at its first AGM as a quoted company; and then at least every other year.

at every GM.

at its first AGM as a quoted company; and then at least once every 3 years.

at its first AGM as a quoted company; and then at least once every year.

Answer 69

at its first AGM as a quoted company; and then at least once every 3 years.

correct

Question 70

A company’s shareholders must pass a special resolution for the following:

Authority to allot, disapplication of pre-emptions rights and a share buyback.

Authority to allot, disapplication of pre-emptions rights and approving the remuneration policy.

Disapplication of pre-emptions rights, approving the remuneration policy and reducing the GM notice period to 14 ‘clear’ days.

Disapplication of pre-emptions rights, a share buyback and reducing the GM notice period to 14 ‘clear’ days.

Answer 70

Disapplication of pre-emptions rights, a share buyback and reducing the GM notice period to 14 ‘clear’ days.

Correct

Question 71

A notice of general meeting should state the following:

the date, the time and the place of the meeting and the general nature of the business to be dealt with at the meeting.

the date, the time and the place of the meeting, the directors and shareholders to be present at the meeting and the general nature of the business to be dealt with at the meeting.

the time and the place of the meeting.

the date, the time and the directors to be present at the meeting.

Answer 71

the date, the time and the place of the meeting and the general nature of the business to be dealt with at the meeting.

correct

Question 72

Where a poll has been taken at a general meeting of a traded company, the company must make the following information available on its website:

Information about the number of special resolutions passed.

Information about the number of shareholders present and voting.

Information about the poll results, including the total number of votes validly cast and number of abstentions.

Whether less than 20% of the votes were cast against a board-recommended resolution.

Answer 72

Information about the poll results, including the total number of votes validly cast and number of abstentions.

Correct

Question 73

In practice, a listed company will announce the outcome of its AGM via:

the RIS

a national newspaper

The Gazette

CREST

Answer 73

the RIS

correct

Question 74

A public company can be requisition for a resolution to be included in the AGM by…

…at least 10 shareholders with the right to vote on the resolution at the AGM and holding, on average, per shareholder, at least £100 of paid-up share capital.

…a shareholder or shareholders holding at least 10% of the total voting rights.

…at least 100 shareholders with the right to vote on the resolution at the AGM and holding, on average, per shareholder, at least £1000 of paid-up share capital.

…a shareholder or shareholders holding at least 5% of the total voting rights.

Answer 74

…a shareholder or shareholders holding at least 5% of the total voting rights.

Correct

Question 75

If a supplementary circular is needed for a GM because a new matter needs to be included, that should have been included in the original circular, how many days in advance of a meeting at which shareholders are required to vote should a supplementary circular be sent out?

Six

Five working days

Seven working days

Seven

Answer 75

seven

correct

Question 76

The most usual method of communication by a FTSE 100 company to its shareholders is via…

…email.

…electronic copy.

…hard copy circular

…its website.

Answer 76

…its website.

correct

Question 77

A Rights Issue is…

…an offer of shares to institutional shareholders.

…an offer for the sale of existing shares, made to existing shareholders.

…an offer of rights to apply for new shares, made to new shareholders.

…an offer of rights to apply for new shares, made to existing shareholders.

Answer 77

…an offer of rights to apply for new shares, made to existing shareholders.

Correct

Question 78

When issuing new equity securities for cash, a listed company and/or its directors must always…

…comply with pre-emption rights.

…have authority to allot.

…pass a special resolution.

…disapply pre-emption rights

Answer 78

…have authority to allot.

correct

Question 79

An open offer is…

an invitation to new securities holders to subscribe or purchase securities in proportion to their holdings, which is made by means of a renounceable letter.

an invitation to existing securities holders to subscribe or purchase securities in proportion to their holdings, which is not made by means of a renounceable letter (or other negotiable document).

an offer of shares to institutional shareholders.

an offer for the sale of existing shares only, made to existing shareholders.

Answer 79

an invitation to existing securities holders to subscribe or purchase securities in proportion to their holdings, which is not made by means of a renounceable letter (or other negotiable document).

correct

Question 80

Company plc (‘Company’) is listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. The shareholders of Company passed a special resolution at its AGM last month to hold general meetings on shorter notice. Company has a provision in its articles of association which provides that service of all notices is deemed to have occurred the day after posting. Company wishes to hold a general meeting as soon as possible.

On the basis of the above information, which one of the following statements is CORRECT?

Company can hold the meeting on 14 clear days’ notice.

Company can hold the meeting on 21 clear days’ notice.

Company can hold the meeting on 14 clear days’ notice plus 2 days for posting.

Company can hold the meeting as soon as reasonably practical on short notice.

Answer 80

Company can hold the meeting on 14 clear days’ notice.

correct

Question 81

Company plc (‘Company’) is listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company passed the usual ‘routine’ resolutions at its AGM last week. Company now wishes to conduct a share buyback by purchasing 10% of its own ordinary share capital.

On the basis of the above information, which one of the following statements is CORRECT?

Company must seek additional approval as it is purchasing equity securities.

Company does not need to seek additional shareholder approval.

Company must conduct a tender offer to all of the ordinary shareholders.

Company must seek additional shareholder approval.

Answer 81

Company does not need to seek additional shareholder approval.

Correct
see LR 12

Question 82

Company plc (‘Company’) is listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company has mostly institutional shareholders but also has some retail and some overseas shareholders. Company wishes to raise further finance for expansion by way of a secondary share issue. It needs to raise a large amount of capital and wishes to offer the shares to its shareholders pre-emptively, keeping them happy and offering the shares with a large discount.

On the basis of the above information, what type of secondary issue would Company be most likely to use? Please choose one of the following options:

Open offer

Vendor placing

Placing

Rights issue

Answer 82

Rights issue

Correct!

Question 83

The PEG Statement of Principles recommends that a listed company should only seek a disapplication of issued share capital for general corporate purposes only (with no follow-on disapplication) up to what level?

2%

10%

20%

5%

Answer 83

10%

correct

Question 84

The PEG Statement of Principles recommends that a listed company should only seek a disapplication of issued share capital for a specified capital investment (with no follow-on) up to what level?

20%

5%

22%

10%

Answer 84

20%

correct

Question 85

Company plc (‘Company’) whose shares are admitted to listing on the Official List and admitted to trading on the Main Market of the London Stock Exchange is carrying out a placing of 10% of its issued share capital. Company has 100 million ordinary shares in issue. Company has not carried out any other share issues in the last 12 months.

Will Company need to produce a prospectus for the purposes of the placing?

No prospectus is required as there is an exemption to Test 1 only.

A prospectus is required for a placing of 10%.

No prospectus is required as there are exemptions to Test 1 and Test 2.

A prospectus is required for a placing as it is an offer of shares to the public.

Answer 85

No prospectus is required as there are exemptions to Test 1 and Test 2.

correct

Question 86

Shareholders under a rights issue have the following options:

take up rights, sell rights to a related party or let the rights lapse.

sell the rights or let rights lapse, or a combination of these options.

take up rights, sell rights, sell rights to a connected person, let rights lapse, or a combination of these options.

take up rights, sell rights, let rights lapse, or a combination of these options.

Answer 86

take up rights, sell rights, let rights lapse, or a combination of these options.

Correct

Question 87

On a 1:2 rights issue, how many shares will a shareholder currently holding 10 ordinary shares be offered?

10

5

20

2

Answer 87

5

correct

Question 88

How many days does an offer relating to a rights issue need to remain open for?

15 business days

At least 11 business days

At least 10 days.

At least 10 business days.

Answer 88

At least 10 business days.

correct

Question 89

Shareholders under an open offer have the following options:

take up rights, sell rights, let rights lapse, or a combination of these options.

take up rights or let rights lapse

sell the rights or let rights lapse, or a combination of these options.

take up rights or the sell rights

Answer 89

take up rights or let rights lapse

correct

Question 90

Unless specifically agreed by the company’s shareholders, what is the maximum discount to middle market share price allowed on announcing an open offer?

5%

20%

10%

7%

Answer 90

10%

correct

Question 91

Which of the following documents are most likely to be required on an open offer where a GM is not required?

RIS announcement, circular, prospectus, application form.

GM notice, circular, RIS announcement, PAL, prospectus.

Gazette notice, circular, RIS announcement, prospectus.

Circular, RIS announcement, prospectus, PAL, application form.

Answer 91

RIS announcement, circular, prospectus, application form.

Correct

Question 92

At its most recent annual general meeting (‘AGM’), Company passed the standard resolutions in respect of both authority to allot and disapplication of pre-emption rights in accordance with the most recent institutional guidelines. Company has not issued any shares since the AGM and has no cap on the number of shares that it can issue in its articles of association.

What authority would the directors of Company have received at the AGM in relation to issuing the Shares in the Placing?

The board of Directors would have authority for a disapplication of pre-emption rights up to a nominal value of £22.5 million.

The board of Directors would have authority for a disapplication of pre-emption rights up to a nominal value of £21.6 million.

The board of directors of Company would have authority to allot shares up to a nominal value of £90 million

The board of directors of Company would have authority to allot shares up to a maximum nominal value of £30 million.

Answer 92

The board of directors of Company would have authority to allot shares up to a maximum nominal value of £30 million.

Correct
Correct!

Question 93

Company plc (‘Company’) has ordinary shares of £1 each (‘Shares’) admitted to the Official List and to trading on the Main Market of the London Stock Exchange. Company currently has 75 million Shares in issue and the Shares are currently trading at a price of 200 pence each.

Company is considering an open offer in order to finance £90 million to purchase a new warehouse. Company would like to offer the new shares in the open offer at a 10% discount to current market price (the ‘Open Offer’). At its most recent annual general meeting (‘AGM’). Company passed the standard resolutions in respect of both authority to allot and disapplication of pre-emption rights in accordance with the relevant institutional guidelines. Company has not issued any shares since its last AGM and has no cap on the number of shares that it can issue in its articles of association.

What is the maximum amount of money that could be raised in the Open Offer?

Company would be able to raise £45 million.

Company would be able to raise £90 million.

Company would be able to raise £50 million.

Company would be able to raise £25 million.

Answer 93

Company would be able to raise £90 million.

correct

Question 94

At its most recent annual general meeting (‘AGM’), Company passed the standard resolutions in respect of authority to allot and disapplication of pre-emption rights in accordance with the relevant institutional guidelines. Company has not issued any shares since its last AGM and has no cap on the number of shares that it can issue in its articles of association.

Which of the following statements is correct, in relation to how much money could be raised on the Rights Issue?

Company would only be able to raise £60 million by way of the Rights Issue.

Company would be able to raise the £70 million required by way of the Rights Issue.

Company would be able to raise £180 million by way of the Rights Issue.

Company would only be able to raise £45 million by way of the Rights Issue.

Answer 94

Company would be able to raise the £70 million required by way of the Rights Issue.

correct

Question 95

‘Inside information’ for the purposes of MAR…

includes information which if made public, would be likely to have any effect on prices of the relevant financial instruments (or related derivatives).

is defined to include information which has not been made public.

will be interpreted to include information which a sophisticated investor would be likely to use as part of the basis of their investment decisions.

must be communicated to the public within 2 weeks of being identified by the issuer according to the general disclosure obligation.

Answer 95

is defined to include information which has not been made public.

Correct! You find the definition in Art. 7(1)(a) MAR, which is then interpreted in light of Art. 7(4). That definition in Art. 7 clarifies how a listed company complies with the general disclosure obligation in Art. 17(1) (which is to inform the public as soon as possible of inside information which directly concerns the issuer).

incorrect
includes information which if made public, would be likely to have any effect on prices of the relevant financial instruments (or related derivatives).

Incorrect. See the definition of inside information in Art. 7(1)(a) to discover what effect on prices the information must have.

Question 96

A listed company can delay the disclosure of inside information…

provided that one of the conditions in Art. 17(4) is met.

under Art. 17(4) and will need to inform the FCA of its reasoning at the time it decides to delay the disclosure.

under Art. 17(4) on its own responsibility but the company will need to keep detailed records of its decision-making process in respect of the delay.

that is unexpected and significant for as long as it wishes, so long as the company prepares a holding announcement.

Answer 96

under Art. 17(4) on its own responsibility but the company will need to keep detailed records of its decision-making process in respect of the delay.

Correct. It is the listed company’s decision to delay such a disclosure but the company must be prepared for the possibility that the FCA requests a written explanation of the company’s reasons for the delay if the company later discloses the information.

Question 97

In the context of a listed company delaying the disclosure of inside information…

the ESMA Guidelines includes an exhaustive list of situations in which the delay is likely to mislead the public.

it would be possible to delay if the company is conducting negotiations, where the outcome of such negotiations would likely be jeopardised by immediate public disclosure.

for an unexpected and significant event, the holding announcement, if released, avoids the need for any further follow-up announcements.

a listed company can delay if immediate disclosure is likely to prejudice the “legitimate interests” of the public.

Answer 97

it would be possible to delay if the company is conducting negotiations, where the outcome of such negotiations would likely be jeopardised by immediate public disclosure.

Correct! This is a circumstance in which the immediate disclosure of inside information is likely to prejudice the issuer’s legitimate interests according to the ESMA Guidelines.

incorrect
a listed company can delay if immediate disclosure is likely to prejudice the “legitimate interests” of the public.

Incorrect
Incorrect. See Art. 17(4). It does not refer to the legitimate interests of the public.

Question 98

MAR includes as the definition of…

a person discharging managerial responsibilities (‘PDMR’): a shareholder of the issuer.

a person closely associated (‘PCA’) with a person discharging managerial responsibilities (‘PDMR’): a relative of a PDMR who has shared the same household for at least six years on the date of the transaction.​

a person discharging managerial responsibilities (‘PDMR’): a member of the administrative, management or supervisory body of the issuer (i.e. a director).

a person discharging ministerial responsibilities (‘PDMR’): a member of the administrative, management or supervisory body of the issuer (i.e. a director).

Answer 98

a person discharging managerial responsibilities (‘PDMR’): a member of the administrative, management or supervisory body of the issuer (i.e. a director).

Correct! The definition of a PDMR is contained in Art. 3(1)(25) MAR.

Question 99

One of the directors of Company plc (which has its shares listed on the official list and admitted to trading on the Main Market of the London Stock Exchange) is also a shareholder of Company plc.

Which one of the following statements is correct?

The director would, for example, be able to sell their shares during any “closed period” of Company plc as they are not bound by Art. 19(11) MAR.

There are no exceptions to the restriction contained in Art. 19(11) MAR.

The director may not conduct any transaction relating to the shares they hold during any “closed period” of Company plc. Each closed period lasts for 30 calendar days before the announcement of an interim financial report or a year-end report of Company plc.

The director may not conduct any transaction relating to the shares they hold during any “closed period” of Company plc. Each closed period lasts for 20 calendar days before the announcement of an interim financial report or a year-end report of Company plc.

Answer 99

The director may not conduct any transaction relating to the shares they hold during any “closed period” of Company plc. Each closed period lasts for 30 calendar days before the announcement of an interim financial report or a year-end report of Company plc.

Correct! You have recognised that the director will be considered a PDMR under Art. 3(1)(25) MAR and so will be bound by Art. 19(11) MAR.

Question 100

PDMRs and their PCAs must disclose to the issuer any transactions caught by MAR Art. 19…

promptly and no later than five working days after the transaction.

promptly and no later than three working days after the transaction.

within 30 calendar days of the announcement of an interim financial report or a year-end report.

within two working days of the transaction.

Answer 100

promptly and no later than three working days after the transaction.

Correct! This is the timescale set out in Art. 19(1) MAR.

incorrect
within two working days of the transaction.

Incorrect
Incorrect. You may have confused this with the timescale set out in Art 19(3) MAR (which deals with the notification of the public by the issuer). This question is asking you about the initial notification to the issuer. See Art. 19(1) MAR instead.

Question 101

In which of these scenarios is a notification required from a shareholder in a UK listed company to that company under DTR 5.1.2(1)?

The shareholder’s percentage of voting rights changes from 4% to 3% after a sale of some their shares.

The shareholder’s percentage of voting rights stays at 7%.

The shareholder’s percentage of voting rights changes from 2% to 1% after a sale of some their shares.

The shareholder’s percentage of voting rights changes from 1% to 2% after a purchase of further shares.

Answer 101

The shareholder’s percentage of voting rights changes from 4% to 3% after a sale of some their shares.

Correct! Under DTR 5.1.2(1) a notification from the shareholder is required as their shareholding has changed in this example by 1% downwards in the range between 3% and 100%. Here, their shareholding changed from 4% to 3%.

Question 102

A UK company with shares admitted to trading on a regulated market must notify an RIS after receiving a DTR 5.1.2 notification from a shareholder by…

not later than two trading days after the date on which the shareholder learnt of the transaction.

the end of the day of receipt.

not later than the end of the following trading day after receipt.

no later than the end of the third trading day after receipt.

Answer 102

not later than the end of the following trading day after receipt.

Correct! This is the timescale set out in DTR 5.8.12(1).

Incorrect
the end of the day of receipt.

Incorrect. See DTR 5.8.12.
not later than two trading days after the date on which the shareholder learnt of the transaction.

Incorrect. You have mistakenly considered DTR 5.8.3 which deals with the timing of the original DTR 5.1.2 notification by the shareholder to the company. This question is asking you about the follow-up notification by the company to an RIS. See DTR 5.8.12 instead.

Question 103

Where a shareholder makes a DTR 5.1.2 notification to the UK listed company, the shareholder must also…

notify a PIP.

file a copy of that “TR5” notification form with the FCA.

file a copy of that “TR1” notification form with the FCA.

notify the other shareholders of the company directly using that “TR1” notification form.

Answer 103

file a copy of that “TR1” notification form with the FCA.

Correct
Correct! You have understood DTR 5.9.1 and DTR 5.8.10.

Incorrect
notify the other shareholders of the company directly using that “TR1” notification form.

Incorrect. You have recognised the need for a “TR1” form under DTR 5.8.10. However, you can look at DTR 5.9.1 in respect of this question.

Question 104

One of Company’s directors has just discovered that a large customer has recently gone into liquidation and cannot pay any of its debts. This will have a huge effect on the Company’s revenue stream and will be contradictory to the market’s expectation based on the Company’s most recent communications to its shareholders.

Which one of the following statements best describes any announcement that should be made to the market?

Company should consider making an announcement under Article 17(1) of the Market Abuse Regulation.

If Company can ensure the confidentiality of the information, it would not need to disclose the loss of revenue.

If there is an unexpected and significant event, a delay in disclosing the incident of up to 3 weeks may be acceptable if it is necessary to clarify the situation.

Immediate disclosure is likely to prejudice the ‘legitimate interests’ of the Company and therefore the Company would not need to disclose.

Answer 104

Company should consider making an announcement under Article 17(1) of the Market Abuse Regulation.

correct

Question 105

A public limited company (‘Company’) is listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange and has 10 directors in total. A director (‘Director A’) and another director (‘Director B’) are two of the directors of Company. Director A and Director B both own one million shares each in Company’s issued share capital of 50 million ordinary shares. Today Director A purchases a further one million shares in Company. Today Director B sells their one million shares in Company. Director A and Director B are not connected, or persons closely associated.

Which one of the following statements describes the notification that would need to be made following the share dealings?

Following their purchase of shares, under DTR 5 Director A must notify Company of the acquisition by the end of the next business day.

Director A must make a notification to Company of their purchase of shares pursuant to DTR 5 as their shareholding has increased from 2% to 4%.

Following any notification of a purchase of shares by Director A, under DTR 5 Company must notify the FCA of the acquisition by the end of the next business day.

.

Director B has sold all their shares and must therefore make a notification under DTR 5.

Answer 105

Director A must make a notification to Company of their purchase of shares pursuant to DTR 5 as their shareholding has increased from 2% to 4%.

Correct

incorrect
Director B has sold all their shares and must therefore make a notification under DTR 5.

Incorrect – have another look at MAR Art 19 and DTR 5.1.2.

Following their purchase of shares, under DTR 5 Director A must notify Company of the acquisition by the end of the next business day.

Incorrect – have another look at MAR Art 19 and DTR 5.1.2.

Question 106

A public limited company (‘Company’) is listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. A shareholder (‘S’) in Company holds a total of 3,000,000 shares and S has decided to sell 1,000,000 of its shares in Company. Company has an issued share capital of 80,000,000 shares.

When must S notify the Company following its sale of shares?

S must make a notification to Company of the sale of their shares within four trading days.

S must make a notification to Company of the sale of their shares by the end of the trading day following the sale.

S must make a notification to Company of the sale of their shares within two trading days.

S does not need to make a notification to Company of the sale of their shares pursuant to DTR 5 as their shareholding has decreased.

Answer 106

S must make a notification to Company of the sale of their shares within two trading days.

Correct

incorrect
S must make a notification to Company of the sale of their shares by the end of the trading day following the sale.

Incorrect – have another look at DTRs 5.1.1 (6), 5.1.2, 5.8.3 and 5.8.12.

Question 107

In light of your understanding of the Criminal Justice Act 1993 (‘CJA 1993’) offences, which of the following statements is correct?

The offences under the CJA 1993 can be committed by individuals and legal persons (for example, companies).

In order to be found guilty of the CJA 1993 offences, the ‘insider’ must have received the information from an ‘inside source’, which includes information obtained by way of their employment.

There are only two offences which can be committed by an ‘insider’ under the CJA 1993.

The offences under the CJA 1993 are civil offences.

Answer 107

In order to be found guilty of the CJA 1993 offences, the ‘insider’ must have received the information from an ‘inside source’, which includes information obtained by way of their employment.

Correct! This aligns with the second requirement of the definition of ‘insider’ in s. 57(1)(b) and the definition of an ‘inside source’ in s. 57(2) CJA 1993.

Question 108

In light of your understanding of the market abuse offences under MAR, which of the following statements is correct?

If a person who is in possession of inside information can demonstrate that they fall within one of the categories of legitimate behaviour, it will be for the FCA to prove that the person has, in fact, engaged in the insider dealing offence of market abuse.

A company director will not be deemed to possess inside information about that company and so cannot be found guilty of the market abuse offences under MAR.

There are only two market abuse offences which can be committed under MAR.

The market abuse offences under MAR allow for criminal penalties to be imposed on the wrongdoer.

Answer 108

If a person who is in possession of inside information can demonstrate that they fall within one of the categories of legitimate behaviour, it will be for the FCA to prove that the person has, in fact, engaged in the insider dealing offence of market abuse.

Correct! The legitimate behaviours are contained in Art. 9 MAR. If a person can rely on one of those safe harbours then they will not automatically be deemed to have engaged in the insider dealing offence of market abuse.

Question 109

Which of the following statements is correct?

The maximum prison sentence for an offence under Part 7 Financial Services Act 2012 is 15 years.

The offences under Part 7 Financial Services Act 2012 are mutually exclusive and a prosecutor could only bring charges under one section.

The Fraud Act 2006 includes criminal offences which prosecutors could rely on, in addition to the insider dealing offences under the Criminal Justice Act 1993 and the market abuse offences under MAR.

Under Part 7 Financial Services Act 2012 (‘FS Act’), it is a civil offence for a person to make misleading statements (s.89 FS Act) or engage in market manipulation (s.90 FS Act).

Answer 109

The Fraud Act 2006 includes criminal offences which prosecutors could rely on, in addition to the insider dealing offences under the Criminal Justice Act 1993 and the market abuse offences under MAR.

Correct! There are criminal offences contained in s.2(1), s.3 and s.4(1).

Question 110

Which of the following statements is correct?

A “leak announcement” is used to ensure there is not a breach of confidentiality where an issuer is relying on Art. 17(4) MAR to delay disclosure.

If an issuer is relying on Art. 17(4) MAR to delay disclosure it should prepare a “leak announcement” which needs to be kept updated, as appropriate, so it can be released in the event of a breach of confidentiality.

A “leak announcement” must always be released if an issuer is relying on Art. 17(4) MAR to delay disclosure.

If an issuer is relying on Art. 17(4) MAR to delay disclosure the FCA will prepare a “leak announcement” which it will keep updated, as appropriate, so it can be released in the event of a breach of confidentiality.

Answer 110

If an issuer is relying on Art. 17(4) MAR to delay disclosure it should prepare a “leak announcement” which needs to be kept updated, as appropriate, so it can be released in the event of a breach of confidentiality.

Correct! This is covered by DTR 2.6.3. The announcement is referred to as a holding or a leak announcement.

Question 111

Which of the following statements is correct?

Market soundings under Art. 11 MAR provide an opportunity for companies to find out the reaction of selected shareholders and/or potential investors after a company has embarked on a transaction.

Where a company carries out a valid market sounding under Art. 11 MAR, then the company will have breached Art. 10 MAR as it has unlawfully disclosed inside information.

In order not to breach Art. 10 MAR, the disclosing company would need to ensure that the person disclosing the market sounding information was not doing so in the normal exercise of their employment, profession or duties.​

Where information which has been disclosed during market soundings ceases to be inside information, the company disclosing must inform the person who received the information as soon as possible.

Answer 111

Where information which has been disclosed during market soundings ceases to be inside information, the company disclosing must inform the person who received the information as soon as possible.

Correct! This is contained in Art. 11(6) MAR and is known as “cleansing” the inside information.

Question 112

Which of the following statements about insider lists is correct?

Only the listed company itself can produce the insider list, rather than any of its advisors.

Insider lists must be kept for a period of at least five years after they are drawn up or updated.

There are no requirements around what details should be contained on an insider list. This is left to the discretion of the issuer.

Once a listed company has produced an insider list, the list need not ever be updated.

Answer 112

Insider lists must be kept for a period of at least five years after they are drawn up or updated.

Correct! This is covered in Art. 18(5) MAR.

Question 113

Which of the following statements about listed company announcements is correct?

A listed company makes announcements to the market via a Regulatory Information Service (‘RIS’), which will be a primary information provider (‘PIP’) approved by the FCA.

Primary information providers (‘PIPs’) disseminate market information directly to market users.

Disclosures made by a listed company by way of an announcement have no content requirements to meet.

Disclosures made by a listed company by way of an announcement will also be filed with the SRA via the National Storage Mechanism.

Answer 113

A listed company makes announcements to the market via a Regulatory Information Service (‘RIS’), which will be a primary information provider (‘PIP’) approved by the FCA.

Correct! This complies with DTR 6.3 (specifically DTR 6.3.2).

Question 114

If a listed company breaches the MAR disclosure obligations, what penalties could be imposed?

The company faces the possibility of fines, public censure and disgorgement of profits for breaching MAR.

The directors of that company face the possibility of fines for breaching MAR.

The company faces the possibility of its shares being delisted for breaching MAR.

The directors of that company face imprisonment for breaching MAR.

Answer 114

The company faces the possibility of fines, public censure and disgorgement of profits for breaching MAR.

Correct! You have identified the consequences of breaching MAR.

Question 115

If an investor in a listed company relied on inaccurate information published by that company, what action can the investor take?

The investor can bring action against the company for the loss suffered due to the inaccuracy but only if all persons discharging managerial responsibilities in that company knew the announcement was untrue or misleading or were reckless as to that fact.

If the inaccurate information was contained in a prospectus, the listed company could be liable to pay compensation under both s. 90A and s. 90 FSMA.

The investor has no opportunity to bring action against the company.

The investor can bring action against the company for the loss suffered due to the inaccuracy but only if a person discharging managerial responsibilities in that company knew the announcement was untrue or misleading or was reckless as to that fact.

Answer 115

The investor can bring action against the company for the loss suffered due to the inaccuracy but only if a person discharging managerial responsibilities in that company knew the announcement was untrue or misleading or was reckless as to that fact.

Correct! This claim would be under s.90A and paragraph 3(2), Schedule 10A FSMA.

incorrect
If the inaccurate information was contained in a prospectus, the listed company could be liable to pay compensation under both s. 90A and s. 90 FSMA.

Incorrect. See paragraph 4, Schedule 10A FSMA.

Question 116

A public limited company (‘Company A’) is considering an acquisition of the shares in another public limited company (‘Company B’) whose shares are listed on the Official List and traded on the Main Market of the London Stock Exchange. Company A has contacted Company B’s board of directors on a confidential basis and is currently conducting preliminary due diligence with a view to announcing a takeover bid for Company B (‘Proposed Bid’)

A solicitor (‘Solicitor’) is advising Company A on the Proposed Bid. Solicitor is not going to buy any shares in Company B but last night Solicitor discussed the Proposed Bid with their husband (‘Husband’), and suggested that Husband should buy shares in Company B. Husband bought shares in Company B this morning.

Which one of the following statements is correct in relation to the above information pursuant to the Criminal Justice Act 1993 (‘CJA’)?

The Proposed Bid would not be inside information under s.56(1) CJA.

Husband is guilty of insider dealing by virtue of s.52(1) CJA.

Solicitor is likely to have a defence under s.53 (1)(a) CJA.

Husband is guilty of insider dealing by virtue of section 52(2)(b) CJA.

Answer 116

incorrect
Husband is guilty of insider dealing by virtue of section 52(2)(b) CJA.

Incorrect – have another look at s.52 CJA.

Question 117

A solicitor (‘Solicitor’) is advising a client on the takeover (the ‘Takeover’) of a public limited company (the ‘Target’). Target’s shares are admitted to listing on the Official List and are traded on the Main Market of the London Stock Exchange. Over dinner one night Solicitor chats to an uncle about the Takeover. The following day Solicitor’s uncle decides to purchase some shares in the Target. The Takeover is announced to the market three days later and the share price of Target significantly increases.

Which one of the following statements is correct in relation to the Solicitor’s potential breaches of the UK Market Abuse Regulations (‘MAR’)?

As Solicitor is working on the Takeover as an adviser, their actions are deemed to be ‘legitimate behaviour’ under Art.9 MAR.

Solicitor has unlawfully disclosed the information and breached Art.14(c) MAR.

Solicitor will not be deemed to be ‘in possession of inside information’ under Art.8(4)(c) MAR.

If found guilty of any offences under MAR, Solicitor could be fined and imprisoned for a term of up to 10 years.

Answer 117

Solicitor has unlawfully disclosed the information and breached Art.14(c) MAR.

correct

Question 118

A solicitor (‘Solicitor’) is advising a client (‘Bidder’) on the takeover of a company (the ‘Target’) whose shares are admitted to listing on the Official List and are traded on the Main Market of the London Stock Exchange (the ‘Takeover’). Target is one of Bidder’s main competitors in their industry. The boards of Bidder and Target have just begun confidential negotiations, but the board of Bidder is hopeful that a recommended bid can be agreed and announced to the market in the next two weeks.

Which one of the following statements best describes any potential disclosure required in relation to the Takeover?

Bidder would need to make an immediate disclosure as the Takeover is likely to have a significant effect on the share price of both Bidder and Target.

A holding announcement regarding the Takeover would need to be released immediately.

Bidder and Target have a ‘legitimate interest’ to delay disclosure.

An immediate disclosure would be required if the Bidder were to give any detailed information regarding the Takeover to its investment bank acting on the Takeover.

Answer 118

Bidder and Target have a ‘legitimate interest’ to delay disclosure.

correct

Question 119

Takeovers are most often referred to as…

Public M&A

Acquisitions.

Hostile mergers.

Capital re-organisations.

Answer 119

Public M&A

Correct! Public M&A (public mergers and acquisitions)

Question 120

Under the Takeover Code the bidder is referred to as the…

Target.

Buyer.

Offeree.

Offeror.

Answer 120

Offeror.

Correct!

Question 121

The target board is required to take independent financial advice from the ‘Rule 3 adviser’ on whether the financial terms of the offer are…

fair and reasonable.

at the highest price paid in the last 2 years.

at the best possible price

in cash with a cash alternative.

Answer 121

fair and reasonable.

Correct

Question 122

The Takeover Code applies to any offer when…

target has its shares admitted to trading on an overseas market.

target is a company registered at Companies House and incorporated in England and Wales.

bidder has its shares admitted to trading on a UK regulated market.

target has has its shares admitted to trading on a UK regulated market.

Answer 122

target has has its shares admitted to trading on a UK regulated market.

Correct

Question 123

Which one of the following statements is correct?

Taking legal advice on the Takeover Code Rules is an appropriate alternative to consulting with the Panel.

The ‘spirit’ of the Takeover Code Rules, as well as their letter must be observed.

The FCA is responsible for the day-to-day operation of the Panel.

The strict letter of the law must be observed regarding the Takeover Code Rules.

Answer 123

The ‘spirit’ of the Takeover Code Rules, as well as their letter must be observed.

correct

Question 124

Which one of the following statements is correct?

The Takeover Code applies only applies to recommended takeover offers.

The Panel can take disciplinary action including awarding a custodial sentence against those who breach the Takeover Code.

The Takeover Code is issued by the Financial Conduct Authority.

The Takeover Panel has a wide range of statutory powers in relation to the monitoring of takeovers and the administration of the Code under Part 28 CA 2006.

Answer 124

The Takeover Panel has a wide range of statutory powers in relation to the monitoring of takeovers and the administration of the Code under Part 28 CA 2006.

correct

Question 125

Which one of the following statements is correct?

A recommended offer is an offer where the directors of a target board have recommended to the target’s shareholders that they accept the offeror’s offer. The target shareholders still make the decision whether or not to accept.

A recommended offer is an offer where the directors of a target board have recommended to the target’s shareholders that they accept the offeror’s offer. The target shareholders still have to negotiate the final price for the shares.

A recommended offer is an offer where the directors of the bidder have recommended to the target’s shareholders that they accept the offer. The target shareholders still make the decision whether or not to accept.

A recommended offer is an offer where the directors of a target board accepted the offeror’s offer on behalf of the target shareholders.

Answer 125

A recommended offer is an offer where the directors of a target board have recommended to the target’s shareholders that they accept the offeror’s offer. The target shareholders still make the decision whether or not to accept.

Correct!

Question 126

Which one of the following statements is correct?

A hostile bid can occur if the target board is not prepared to engage in discussions with a potential bidder.

A bidder cannot decide to launch a hostile bid from the outset.

A scheme of arrangement is a suitable structure for a hostile bid.

A hostile bid is less risky for the bidder than a recommended bid.

Answer 126

A hostile bid can occur if the target board is not prepared to engage in discussions with a potential bidder.

correct

Question 127

Irrevocable undertakings are…

always ‘soft’, whereby the shareholder may withdraw if for e.g., another party makes a higher offer.

a commitment, usually made by the bidder’s directors, to accept the offer which may influence the decision of other target shareholders on whether to accept the bid.

a commitment, usually made by the target’s major shareholders and/or directors to the bidder to accept the offer which may influence the decision of other target shareholders on whether to accept the bid.

always binding in all circumstances.

Answer 127

a commitment, usually made by the target’s major shareholders and/or directors to the bidder to accept the offer which may influence the decision of other target shareholders on whether to accept the bid.

correct

Question 128

Which one of the following statements is correct?

A firm intention announcement is required when there or there is an untoward movement in the target company’s share price.

An announcement is only required when the offeror company is the subject of rumour and speculation

An announcement is required when a firm intention to make an offer is notified by a bidder to the board of the target company.

An announcement is always required when the bidder first approaches the board of the target company.

Answer 128

An announcement is required when a firm intention to make an offer is notified by a bidder to the board of the target company.

Correct!

Question 129

Which one of the following statements is correct with regards to ‘untoward movements’ in share price?

The Panel is likely to consider an untoward movement to be a price movement of 5% or more above the offeree’s lowest share price since the time of the approach.

the Panel is likely to consider an untoward movement to be a price movement of 6% or more above the offeree’s lowest share price since the time of the approach.

The Panel is likely to consider an untoward movement to be a price movement of 5% in a single day.

The Panel is likely to consider an untoward movement to be a price movement of 10% in a single day.

Answer 129

The Panel is likely to consider an untoward movement to be a price movement of 5% in a single day.

correct!

Question 130

What announcement will usually be made after a Rule 2.2(c) trigger where there has been rumour or speculation in the market.

A Rule 2.6 announcement.

A Rue 2.7 ‘firm intention’ announcement.

A Rule 2.8 ‘no intention’ announcement

A Rule 2.4 ‘talks’ announcement.

Answer 130

A Rule 2.4 ‘talks’ announcement.

Correct!

Question 131

In a hostile takeover, if the bidder post its offer document on Day 0, by when must the board of the offeree company send out its defence circular to its shareholders?

No later than Day 7.

No later than Day 21.

No later than Day 14.

No later than Day 60.

Answer 131

No later than Day 14.

Correct!

Question 132

To be effective, the scheme of arrangement must be approved at a court-convened meeting of target shareholders by…

75% in number of target shareholders (present and voting) and 75% in value of the shares of target shareholders (present and voting).

a majority in number of target shareholders (present and voting) and 75% in value of the shares of target shareholders (present and voting).

75% in number of target shareholders (present and voting) and over 50% in value of the shares of target shareholders (present and voting).

a majority in number of target shareholders (present and voting) and over 50% in value of the shares of target shareholders (present and voting).

Answer 132

a majority in number of target shareholders (present and voting) and 75% in value of the shares of target shareholders (present and voting).

correct

Question 133

Which one of the following statements is correct?

A disadvantage of a scheme is that it is less likely to give this impression of being a ‘merger’ of equals as the target directors are less in control than in a traditional contractual offer.

The compulsory acquisition procedure is only available when conducting a scheme of arrangement.

An advantage of a scheme is that by acquiring 100% of the target shares the bidder immediately satisfies the 75% threshold needed to delist the company and take it private.

An advantage of a scheme is that the approval threshold delivers a guaranteed 90% ownership therefore it can satisfy the threshold for the compulsory acquisition procedure.

Answer 133

An advantage of a scheme is that by acquiring 100% of the target shares the bidder immediately satisfies the 75% threshold needed to delist the company and take it private.

Correct

Question 134

Which one of the following statements is correct in relation to a scheme of arrangement?

A scheme of arrangement for a takeover is an agreement between the bidder company and the target company’s members.

A scheme of arrangement for a takeover is an agreement between the company and its creditors.

A scheme of arrangement for a takeover is an agreement between the company and its members.

A scheme of arrangement is the least common way of conducting a takeover.

Answer 134

A scheme of arrangement for a takeover is an agreement between the company and its members.

correct

Question 135

A public limited company (‘Company A’) is considering an acquisition of all of the shares in another pubic limited company (‘Company B’) whose shares are listed on the Official List and traded on the Main Market of the London Stock Exchange. Company A has contacted Company B’s board of directors on a confidential basis and is currently conducting preliminary due diligence with a view to announcing a takeover bid for Company B (the ‘Proposed Bid’). Today there has been rumour and speculation in the market about the Proposed Bid and the share price in Company B has risen by 5%.

What announcement should be made to the market?

Company A should consult with the Panel and consider making a Rule 2.8 announcement to the market.

Company B should consult with the Panel and consider making a Rule 2.4 announcement to the market.

Company B should consult with the Panel and consider making a Rule 2.8 announcement to the market.

Company A should consult with the Panel and consider making a Rule 2.4 announcement to the market.

Answer 135

Company B should consult with the Panel and consider making a Rule 2.4 announcement to the market.

Correct!

Question 136

A company (‘Offeror’) is considering an acquisition of the entire issued share capital of another company (‘Target’) Both Offeror and Target’s shares are listed on the Official List and traded on the Main Market of the London Stock Exchange. Offeror has contacted the board of Target regarding a potential takeover bid for Target (the ‘Proposed Bid’), but the board of Target is not willing to recommend the Proposed Bid to its shareholders. The Offeror is currently preparing its offer document.

In relation to the Proposed Bid, which one of the following statements is correct?

The board of Target board will have 30 days from the date of publication of the Offeror’s offer document to produce a defence document.

The board of Target board will have 28 days from the date of publication of the Offeror’s offer document to produce a defence document.

The board of Target does not need to inform its shareholders about the Proposed Bid or any offer document posted by the Offeror.

The board of Target board will have 14 days from the date of publication of the Offeror’s offer document to produce a defence document.

Answer 136

The board of Target board will have 14 days from the date of publication of the Offeror’s offer document to produce a defence document.

Correct

Question 137

Company A plc (‘Company A’) and the directors of Company B plc (‘Company B’) have agreed terms for Company A to acquire the entire issued share capital of Company B. The parties have decided to structure the takeover as a scheme of arrangement (the ‘Scheme’). The shares of both Company A and Company B are listed on the Official List and traded on the Main Market of the London Stock Exchange.

Company B has an issued share capital of 60 million ordinary shares of £1 each and 7,000 shareholders. Company A does not hold any shares in Company B. Assume that all Company B’s shareholders attend the relevant meetings and vote on the Scheme.

Which one of the following statements is correct in relation to the passing of the Scheme?

The Scheme can be approved by 5250 Company B shareholders holding over 30 million shares.

The Scheme can be approved by 3501 Company B shareholders holding 45 million shares.

The Scheme can be approved by 5250 Company B shareholders holding 45 million shares.

The Scheme can be approved by 3500 Company B shareholders holding 45 million shares.

Answer 137

The Scheme can be approved by 3501 Company B shareholders holding 45 million shares.

Correct!

Question 138

The ‘formal approach’ is ….

where an offeror (or its advisers) must notify a firm intention to make an offer in the first instance to the FCA.

where an offeror (or its advisers) must notify a firm intention to make an offer in the first instance to the RIS. Have another look at Rule 1.1.

where an offeror (or its advisers) must notify a firm intention to make an offer in the first instance to the target shareholders of the offeree.

where an offeror (or its advisers) must notify a firm intention to make an offer in the first instance to the board of the offeree company (or its advisers).

Answer 138

where an offeror (or its advisers) must notify a firm intention to make an offer in the first instance to the board of the offeree company (or its advisers).

Correct
Correct! Rule 1.1.

Question 139

Which one of the following statements is correct?

The ‘firm intention’ announcement indicates that the bidder has posted the offer document.

Following an announcement of a ‘firm intention’ to make an offer, the offeror can decide whether or not to go ahead and make an offer.

The firm intention announcement indicates that the offeree board intends to recommend the bid.

The ‘firm intention’ announcement indicates that the bidder intends to make the takeover bid.

Answer 139

The ‘firm intention’ announcement indicates that the bidder intends to make the takeover bid.

Correct
Correct! Rule 2.1

Question 140

What is a ‘pre-condition’?

A pre-condition is a condition set out in the Rule 2.4 announcement.

A pre-condition applies after a bid has been made.

A pre-condition is a condition in the offer.

A pre-condition is a condition, which if not satisfied means a bidder may not have to go ahead with making an offer.

Answer 140

A pre-condition is a condition, which if not satisfied means a bidder may not have to go ahead with making an offer.

Correct
Correct!

Question 141

If the offer document is posted on Day 0, what is the final day that the offer can be revised?

Day 53

Day 60

Day 21

Day 46

Answer 141

Day 46

Correct! Rule 32.1(c)

Question 142

What percentage holding triggers a Rule 9, Mandatory offer?

Over 25%

Over 30%

Under 30%

30%

Answer 142

30%

Correct

Question 143

Which one of the following statements is correct?

An exemption to Rule 5.1, is any number of acquisitions from shareholders in a 7-day period.

An exemption to Rule 5.1, is an acquisition from a single shareholder in a 7-day period

Under Rule 5.1, a person may not become interested in shares carrying more than 25% of the voting rights in a company.

Under Rule 5.1, a person may not become interested in shares carrying more than 30% of the voting rights in a company.

Answer 143

An exemption to Rule 5.1, is an acquisition from a single shareholder in a 7-day period

Correct! Rule 5. A hostile bid is less risky for the bidder than a recommended bid.

Question 144

Company plc (‘Company’) is a company whose shares are listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company has a total issued share capital of 250 million shares.

On Day 1, a shareholder (‘Shareholder’) buys 40 million shares off the market in Company.

On Day 10 Shareholder buys another 40 million shares off the market in Company. Shareholder did not own any shares in Company prior to Day 1. Shareholder currently has no plans to launch a takeover bid for Company.

On the basis of the information above, which one of the following statements is correct in relation to Rules 5 and 9 of the Takeover Code?

Shareholder would need to make a mandatory offer for the rest of the shares in the company.

Shareholder would have an exemption under Rule 5.2(b)

Shareholder would have an exemption under Rule 5.2(a).

Shareholder would not need to make a mandatory offer for the rest of the shares in the company.

Answer 144

Shareholder would need to make a mandatory offer for the rest of the shares in the company.

Correct! Rule 9.1 - shareholder has acquired 32% of the shares in Company.

incorrect
Shareholder would not need to make a mandatory offer for the rest of the shares in the company.

Incorrect
Incorrect. Have another look at Rule 9.1. Shareholder has acquired 32% of the shares in Company.

Question 145

Company plc (‘Company’) is a company whose shares are listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company has a total issued share capital of 250 million shares.

On Day 1, a shareholder (‘Bidder’) stakebuilds 10 million shares off the market in Company.

On Day 10 Bidder buys a further 15 million shares off the market in Company. Bidder did not own any shares in Company prior to Day 1. Bidder plans to launch a takeover bid for the entire issued share capital of Company in the next few weeks.

On the basis of the information above, which one of the following statements is correct?

Shares held by Bidder before it makes its bid will count towards the 90% threshold.

Bidder can purchase the shares at any price without effecting the takeover bid.

There is no point in Bidder stakebuilding as the shares purchased cannot count towards the 50% plus one share threshold in a takeover bid.

The shares Bidder purchases can count towards the 50% plus one share threshold in a takeover bid.

Answer 145

The shares Bidder purchases can count towards the 50% plus one share threshold in a takeover bid.

Correct! Rule 10.1

incorrect
Shares held by Bidder before it makes its bid will count towards the 90% threshold.

Incorrect. Have another look at s.979 CA.

Question 146

Commencement of the ‘offer period’ starts with ….

a Rule 2.4 announcement.

the posting of the offer document.

a Rule 8 announcement.

a Rule 2.7 announcement that follows a Rule 2.4 announcement.

Answer 146

a Rule 2.4 announcement.

Correct! Under the Takeover Code Definitions “An offer period will commence when the first announcement is made of an offer or possible offer for a company…”

Question 147

Company plc (‘Company’) is a company whose shares are listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Company has a total issued share capital of 250 million shares.

On Day 1, a shareholder (‘Bidder’) buys 10 million shares for cash off the market in Company.

On Day 5 Bidder announces a Rule 2.4 ‘talks announcement’ to the market about a possible offer for the entire shareholding of Company.

On Day 10 Bidder buys a further 15 million shares for cash off the market in Company. Bidder did not own any shares in Company prior to Day 1.

On the basis of the information above, which one of the following statements is correct?

Only Rule 6.2 is triggered.

Rule 11.1(a) is triggered.

Bidder can only offer cash at the lowest price paid as part of any possible offer.

Only Rule 11.1(b) is triggered.

Answer 147

Rule 11.1(a) is triggered.

Correct
Correct! Rule 11.1(a), which can be triggered by any acquisition during the offer period or in the previous 12 months but only if the bidder acquires interests in target shares representing 10% or more in aggregate.

Question 148

An Opening Position Disclosure (an ‘OPD’) announcement must be made under….

Rule 9

Rule 6

Rule 8

Rule 11

Answer 148

Rule 8

Correct!

Question 149

A Public Dealing Disclosure is an announcement which provides details of dealings in relevant securities by the bidder under….

Rule 8.2(b)

Rule 8.1(b)

Rule 8.2(b)

Rule 8.1(a)

Answer 149

Rule 8.1(b)

correct

Question 150

Company plc (‘Company’) is in talks to acquire the entire issued share capital of Target plc (‘Target’). Both Company and Target have shares listed on the Official List and traded on the Main Market of the London Stock Exchange. A Rule 2.4 ‘talks’ announcement was made in relation to the proposed acquisition two weeks ago. This morning Company purchased 5 million shares in Target for cash on the market at 300p per share.

On the basis of the above information, which one of the following statements is CORRECT?

Target must now make a public Dealing Disclosure.

Company must now make a public Opening Position Disclosure.

Target must now make a public Opening Position Disclosure

Company must now make a public Dealing Disclosure.

Answer 150

Company must now make a public Dealing Disclosure.

correct

Question 151

If a bidder launches a bid for target and posts the offer document on Day 0, what day is the earliest possible unconditional date?

Day 46

Day 60

Day 0

Day 21

Answer 151

Day 21

Correct

Question 152

Which one of the following statements is correct in relation to Day 60?

The Panel will normally only extend Day 60 if a competing offer has been announced.

The Panel will normally only extend Day 60 if the bidder wishes to revise the offer.

The Panel will normally only extend Day 60 if the bidder has not met all the conditions of the offer.

The Panel will normally only extend Day 60 if the offeree rejects an extension.

Answer 152

The Panel will normally only extend Day 60 if a competing offer has been announced.

correct

Question 153

If an offeror, who has made a bid, wishes to invoke the acceptance condition before Day 60 so as to cause the offer to lapse on a date which is on or after Day 21 what must the offeror publish?

An Acceleration Statement.

An Acceptance Condition Invocation Notice.

A Day 39 announcement.

A Rule 17.1 announcement.

Answer 153

An Acceptance Condition Invocation Notice.

Correct

Question 154

A public limited company (‘Company A’) is in talks to acquire the entire issued share capital of another public limited company (‘Company B’). Both companies have shares listed on the Official List and traded on the Main Market of the London Stock Exchange. Company B has 100 million shares in issue. A Rule 2.4 ‘talks’ announcement was made in relation to the proposed acquisition 3 days ago.

This morning, Company A purchased 5 million shares in Company B for cash on the market at 300p per share. Company A does not and has not previously owned any shares in Company B. Company A has no further plans to acquire any Company B shares in the market.

Which one of the following statements is correct in relation to the possible takeover?

The 5 million shares purchased by Company A this morning would not count towards the level of acceptances required by Company A pursuant to Rule 10.1 of the Takeover Code.

Company A will need to offer more than 300p per Company B share if it proceeds with a takeover offer for Company B.

Company A should have made a public Dealing Disclosure under Rule 8 of the Takeover Code 3 days ago.

Company A’s offer to Company B shareholders will need to be for cash or be accompanied by a cash alternative

Answer 154

Company A’s offer to Company B shareholders will need to be for cash or be accompanied by a cash alternative

Correct

Question 155

A public company plc (‘Bidder’) and another public limited company (‘Target’) have agreed terms for Bidder to acquire the entire issued share capital of Target. The shares of both Bidder and Target are listed on the Official List and traded on the Main Market of the London Stock Exchange. Bidder announced a firm intention announcement about the takeover last week.

Target has an issued share capital of 100 million ordinary £1 shares between them. Bidder currently holds 1 million shares in Target which it acquired 5 years ago. This morning Bidder bought another 2 million shares in Target for 200p per share.

Which one of the following statements is correct in relation to announcements regarding the stakebuilding?

Bidder must make a notification to Target of its purchase pursuant to Rule 2.7.

Bidder does not need to make a Rule 8 dealing notification as it has only bought 2 million shares.

Bidder must make a notification to Target of its purchase pursuant to DTR 5.

Bidder must make an announcement of a Rule 9 Mandatory offer.

Answer 155

Bidder must make a notification to Target of its purchase pursuant to DTR 5.

Correct

incorrect
Bidder must make a notification to Target of its purchase pursuant to Rule 2.7.

Incorrect – have another look at Rule 8.1.

Bidder does not need to make a Rule 8 dealing notification as it has only bought 2 million shares.

Incorrect
Incorrect – have another look at Rule 8.1

Question 156

A public limited company (‘Offeror’) and another public limited company (‘Offeree’) have agreed terms for Offeror to acquire the entire issued share capital of Offeree. The shares of both Offeror and Offeree are listed on the Official List and traded on the Main Market of the London Stock Exchange. The Offeror does not currently own any shares in Offeree. The board of Offeree has recommended the bid to its shareholders. Offeror announced a firm intention announcement and posted the offer document for the shares in Offeree 3 weeks’ ago. Today is Day 21 of the takeover timetable. The Offeror has received acceptances of 75% of the total issued share capital of Offeree.

Which one of the following statements best describes the next step in the takeover timetable?

Offeror can revise the consideration for the shares in Offeree up to Day 53.

Offeror must make a market announcement about the level of acceptances it has received by 8am on the business day following Day 21.

Offeror can now invoke the compulsory acquisition procedure.

Offeror can declare the offer unconditional as soon as it reaches acceptances of 100%.

Answer 156

Offeror must make a market announcement about the level of acceptances it has received by 8am on the business day following Day 21.

Correct! Rule 17.1

incorrect
Offeror can declare the offer unconditional as soon as it reaches acceptances of 100%.

Incorrect – have another look at Rule 10.1

Offeror can now invoke the compulsory acquisition procedure.

Incorrect – have another look at s979 CA 2006.

Question 157

What is the maximum number of days from an announcement of a scheme to the posting of the scheme circular?

14

21

60

28

Answer 157

28

Correct
Correct! Section 3(a) of Appendix 7

Question 158

What is the minimum number of days from the posting of the scheme circular to holding the court meeting for a scheme of arrangement?

14 clear days

21

7 days

28

Answer 158

21
Correct! Section 3(d)(iii) of Appendix 7 of the Takeover Code.

incorrect
14 clear days

Incorrect. Have a look at 3(d)(iii) of Appendix 7 of the Takeover Code.

Question 159

Company plc (‘Company’) has its shares listed on the Official List and traded on the Main Market of the London Stock Exchange. It has an issued share capital of 100,000,000 ordinary shares of £1 each and 5,000 shareholders.

A potential bidder (‘Bidder’) has agreed terms to acquire the entire issued share capital of Company by way of a scheme of arrangement (the ‘Scheme’). Bidder currently holds no shares in Company.

Assuming that all Company’s shareholders attend the relevant meetings and vote on the Scheme, which one of the following statements is correct?

The Scheme could be approved if 3,500 of Company’s shareholders holding at least 50,000,000 shares vote in favour.

The Scheme, if approved, will bind all Company’s shareholders.

The Bidder could count any pre-owned shares towards voting at a court meeting for the Scheme.

The Scheme could be approved if 2,500 of Company’s shareholders holding at least 75,000,000 shares vote in favour.

Answer 159

The Scheme, if approved, will bind all Company’s shareholders.

Correct
Correct! S.899(3) CA 2006.

incorrect
The Scheme could be approved if 2,500 of Company’s shareholders holding at least 75,000,000 shares vote in favour.

Incorrect
Incorrect. Have another look at s.899(1) and (3) CA 2006.

Question 160

What is the minimum acceptance condition in a traditional offer document?

A majority in number and 75% in voting.

75%

Over 50%

90%

Answer 160

Over 50%
Correct! Rule 10.1

A majority in number and 75% in voting.

Incorrect
Incorrect. This is for a scheme. Have another look at Rule 10.1.

Question 161

Which takeover code rule sets out the content of the offer in relation to the intentions of the offeror with regard to the business, employees and pension schemes?

Rule 24.1

Rule 24.5

Rule 25.2

Rule 24.2

Answer 161

Rule 24.2

Correct

Question 162

Who must give permission to invoke either a pre-condition or a condition?

The Panel

The offeree

The bidder

The offeror

Answer 162

The Panel

Correct! Rule 13.5

Question 163

The bidder may compulsorily acquire the remaining shares to which the offer relates if it has received acceptances in relation to…

not less than 90% in value of the shares to which the offer relates and not less than 75% of the voting rights carried by those shares.

over 50% in value of the shares to which the offer relates and over 50% of the voting rights carried by those shares.

not less than 75% in value of the shares to which the offer relates and not less than 75% of the voting rights carried by those shares

not less than 90% in value of the shares to which the offer relates and not less than 90% of the voting rights carried by those shares.

Answer 163

not less than 90% in value of the shares to which the offer relates and not less than 90% of the voting rights carried by those shares.

Correct
Correct! s.979 (2) CA 2006.

Question 164

Which one of the following statements is correct?

A bidder may choose to convert the target company from a public company to a private company prior to de-listing.

Once a company has de-listed, it must remain a public limited company (plc).

Once a company has been de-listed the target group can provide financial assistance to the bidder.

After de-listing, a bidder may choose to convert the target company from a public company to a private company to reduce the level of regulatory burden on the target company.

Answer 164

After de-listing, a bidder may choose to convert the target company from a public company to a private company to reduce the level of regulatory burden on the target company.

Correct

Question 165

Where an offer or a scheme has not been successful (for e.g., has not been declared unconditional, been withdrawn or lapsed) the bidder must not make another potential bid for the offeree for how long?

18 months

6 months

9 months

12 months

Answer 165

12 months

correct

Question 166

The directors of a public limited company (‘Bidder’) and of another public limited company (‘Target’) have agreed terms for Bidder to acquire the entire issued share capital of Target. The parties have decided to structure the takeover as a scheme of arrangement. The shares of both Bidder and Target are listed on the Official List and traded on the Main Market of the London Stock Exchange.

Target has 20,000 shareholders who hold 1,000,000 ordinary shares between them. Bidder currently holds 50,000 shares in Target.

How could the scheme be approved?

The scheme could be approved by 9,000 Target shareholders, holding 750,000 Target shares.

The scheme could be approved by 10,000 Target shareholders, holding 712,500 Target shares.

The scheme could be approved by 10,001 Target shareholders, holding 712,000 Target shares.

The scheme could be approved by 5,001 Target shareholders, holding 750,000 Target shares.

Answer 166

The scheme could be approved by 10,000 Target shareholders, holding 712,500 Target shares.

incorrect
The scheme could be approved by 10,001 Target shareholders, holding 712,000 Target shares.

Incorrect – have another look at s.899(1) CA 2006.

Question 167

The directors of a public limited company (‘Offeror’) and of another public limited company (‘Offeree’) have agreed terms for Offeror to acquire the entire issued share capital of Offeree. The shares of both Offeror and Offeree are listed on the Official List and traded on the Main Market of the London Stock Exchange. The Offeror owns 5% of the issued shares in Offeree. Offeree has recommended the bid to its shareholders.

Offeror posted the offer document for the shares in Offeree 2 months’ ago. Today is Day 60 of the takeover timetable. The Offeror has received acceptances of 70% of shares in Offeree to which the offer relates. All the non-acceptance conditions to the offer have been satisfied.

Which one of the following statements is correct in relation to the options now available to the Offeror at Day 60?

The Offeror can revise the offer by increasing the price per share to encourage further shareholders in Offeree to sell.

The Offeror can declare the offer unconditional and de-list the company.

The Offeror can declare the offer unconditional and invoke the compulsory acquisition procedure.

The Offeror cannot declare the offer unconditional as it needs to reach 90% shares to which the offer relates.

Answer 167

The Offeror can declare the offer unconditional and de-list the company.

Correct

incorrect
The Offeror can revise the offer by increasing the price per share to encourage further shareholders in Offeree to sell.

Incorrect – have another look at Rule 32.1(c) and Rule 12.1. (last day to revise: day 46)

The Offeror cannot declare the offer unconditional as it needs to reach 90% shares to which the offer relates.

Incorrect
Incorrect – have another look at Rule 10.1

Question 168

The directors of a public limited company (‘Offeror’) and of another public limited company (‘Offeree’) have agreed terms for Offeror to acquire the entire issued share capital of Offeree. The shares of both Offeror and Offeree are listed on the Official List and traded on the Main Market of the London Stock Exchange.

The Offeror currently owns 10% of the total issued share capital in Offeree. Today is Day 60 of the takeover timetable. The Offeror has now received acceptances of 90% of shares to which the offer relates. All the non-acceptance conditions to the offer have been waived or satisfied.

Which one of the following statements is correct in relation to the options now available to the Offeror at Day 60?

The Offeror can declare the offer unconditional but cannot invoke the compulsory acquisition procedure.

The Offeror can declare the offer unconditional but cannot take the company private.

The Offeror cannot declare the offer unconditional at this stage without the consent of the Panel.

The Offeror can declare the offer unconditional and invoke the compulsory acquisition procedure.

Answer 168

The Offeror can declare the offer unconditional and invoke the compulsory acquisition procedure.

Correct
Correct!

Question 169

If the offer document is posted on Day 0, what is the maximum day the offer can be open for?

Day 60

Day 74

Day 21

Day 46

Answer 169

Day 60

Correct! All offer conditions must be satisfied or waived by Day 60. Rule 31.1.

Question 170

If the offer document is posted on Day 0, what is the minimum day the offer must be open for?

Day 21

8am on the business day following Day 21.

Day 60

Day 14.

Answer 170

Day 21

correct