P2 - 8. Securities exchange listing regime

Question 1

What are the two market functions provided by the LSE?

Answer 1

Primary market to raise capital

Secondary market for investors to buy and sell shares

Question 2

Why are applications to both the UKLA and LSE required to list on the Main Market?

Answer 2

Application for listing is made to the UKLA

Admission to trading on the Main Market is made to the LSE.

The Main Market, although the largest, is not the only market where listed shares can be admitted and traded

Question 3

Which of the following transactions will trigger a notification obligation under DTR:

1. Sale of shares taking a holding from 5.9% to 5.1%.
2. Purchase of shares taking holding from 3.9% to 4.1%.
3. Company purchasing and cancelling shares held by shareholder A resulting in shareholder B’s holding
   increasing from 2.9% to 3.0%.
4. Sale of shares taking a holding from 5.1% to 4.9%.

Answer 3

1. Sale of shares taking a holding from 5.9% to 5.1%.
   No
2. Purchase of shares taking holding from 3.9% to 4.1%.
   Yes
3. Company purchasing and cancelling shares held by shareholder A resulting in shareholder B’s holding
   increasing from 2.9% to 3.0%.
   Yes
4. Sale of shares taking a holding from 5.1% to 4.9%.
   Yes

Question 4

What is the purpose of comply or explain?

Answer 4

It is recognised that although the Code represents best practice in the field of corporate governance one size does not fit all and companies should be able to depart from the code provisions but should explain why that approach is appropriate.

Question 5

What is the apply and explain approach?

Answer 5

The Wates Corporate Governance Principles adopt an ‘apply and explain’ approach, under which signatory companies are expected to apply the Principles fully and explain how they have applied them.

Question 6

What is comply or explain?

Answer 6

The ‘comply or explain’ approach requires companies with a premium listing to
(i) apply the Principles of the UK
Corporate Governance Code; and
(ii) comply with the Code’s Provisions or explain why they were not complied with.

Question 7

What is a listed company?

Answer 7

One whose shares have been admitted to the Official List maintained by the FCA in accordance with FSMA2000 s. 74.

Question 8

What is the purpose of the Listing Principles?

Answer 8

Ensure that listed companies pay due regard to the fundamental role they play in maintaining market confidence and ensuring fair and orderly markets.

Question 9

How can securities be floated?

Answer 9

Capitalisation issues (or bonus issues)
Exchanges and conversions
Exercise of options or warrants
Intermediaries offers
Introductions
Offers for sale or subscription
Open offers
Placings
Rights issues
Vendor consideration issues
Other issues
Underwriting

Question 10

If not already appointed, companies considering a listing of their shares either must or should consider the appointment of a range of advisers, including?

Answer 10

Sponsor
Corporate broker
Financial public relations consultants
Lawyers
Reporting accountant
Share registrars
Other advisers

Question 11

Under the UK Prospectus Regulations when is a prospectus requirement triggered?

Answer 11

• To make an offer of securities to the public (Art 3.1) ;or
• The admission of securities to trading on a UK regulated market (Art 3.3).

Question 12

What is an offer to the public?

Answer 12

Under the UK Prospectus Regulation Rules (PRR) -
if there is a communication to any person that presents sufficient information on the transferable securities to be offered and the terms on which they are offered to enable an investor to decide to buy or subscribe for the securities in question

Question 13

Exemptions that apply to both triggers?

Answer 13

• Shares issued in substitution for shares of the same class
• Takeover
• Merger or division
• Scrip dividend
• Employee offer

Question 14

What does the LSE do as a primary market?

Answer 14

Provides companies with cost-efficient access to some of the world’s deepest and most liquid pools of capital.

Question 15

What is the importance of the secondary market?

Answer 15

Allows investors to realise their investment at a time of their choosing

As a result making the availability of capital on the primary market more attractive to investors

Question 16

What are some of the additional reporting, disclosure and other obligations placed on listed companies from a number of sources including the Act, the Listing Rules, the Disclosure and Transparency Rules and the Market Abuse Regulations?

Answer 16

Accounting reference date – change of ARD
Annual report and accounts
Auditor’s report
Directors’ remuneration report
Directors’ report
Dividends (dividend payment)
Publication of financial statements
Resignation of auditors
Rights of members to raise audit concerns
Summary financial information

Question 17

Approach of the UK Corporate Governance Code?

Answer 17

Comply or explain.

Question 18

What is the aim of the UK Stewardship code?

Answer 18

Enhance the quality of engagement between institutional investors and investee companies to help
improve long-term risk adjusted returns to shareholders

Question 19

What three offences were introduced by the Criminal Justice Act 1993 s.52 with regards to insider dealing?

Answer 19

1. dealing in company securities while in the possession of inside information;
2. encouraging another person to deal while in possession of inside information; and
3. disclosing information other than in the proper performance of an office, employment or profession.

Question 20

What must the insider know?

Answer 20

That they possess inside information or

Knowingly acquired inside information from an inside source.

Question 21

Under the POCA 2002 when will a person commit money laundering?

Answer 21

• conceal, disguise, convert or transfer criminal property or remove it from the UK;
• enter into or become involved with an arrangement which they know or suspect facilitates the acquisition, retention, use or control of criminal property; or
• acquire, use or have possession of criminal property.