Private companies and public companies

Question 1

State an administrative benefit that private companies enjoy.

Answer 1

Shareholders can pass shareholder resolutions using the written resolution procedure under s.288 CA 2006.

Question 2

An ordinary resolution can be passed by:

Answer 2

A simple majority of the total voting rights of eligible

members.

Question 3

A special resolution can be passed by:

Answer 3

A majority of not less than 75% of the total voting rights of eligible members

Question 4

The LSE operates the various marketing including:

Answer 4

1. Main Market (for debt and equity securities); and

2. AIM (for equity securities only)

Question 5

What may the Takeover Panel do if it finds that there has been a breach of the City Code?

Answer 5

It may privately or publicly censure the individual or organisation or report the offender’s conduct to another regulatory
authority.

Question 6

Who make up of the Takeover Panel?

Answer 6

Representatives from financial institutions and other professional bodies, including some solicitors seconded from law firms in the City.

Question 7

What formal statutory powers does the Panel have (Part 28 CA 2006)?

Answer 7

1. To order compensation to be paid and may apply to the courts to enforce its rulings.
2. To require parties to provide information in some circumstances.

Question 8

Why are continuing obligations imposed on listed companies?

Answer 8

To protect parties investing in or affected by the operations of the relevant listed company.

Question 9

What are the aims of the rules relating to continuing obligations?

Answer 9

To ensure:

1. timely and accurate disclosure of all relevant information to shareholders
2. equal treatment of all shareholders and protection of existing shareholders
3. the maintenance of an orderly market in shares

Question 10

How does the continuing disclosure obligations achieve its aim?

Answer 10

1. The disclosure of certain information to the market and to shareholders of a listed company
2. The approval of a listed company’s shareholders before key transactions are entered into by the listed company
3. Regulating (and in certain cases requiring FCA approval of) the information sent to shareholders.

Question 11

Certain transaction by listed companies cannot be carried out by the board without the company first having satisfied certain requirements. What are the two types of transactions?

Answer 11

These rules relate to two different types of transactions:

1. transactions classified by size; and
2. transactions with related parties.

Question 12

What is the FCA’s strategic objective?

Answer 12

To ensure that the relevant markets function well

Question 13

What are the three operational objectives by the FCA?

Answer 13

1. To ensure an appropriate degree of protection for consumers
2. To protect and enhance the integrity of the UK financial system; and
3. To promote effective competition in the interests of consumers.

Question 14

What are the 4 roles that FCA has?

Answer 14

The FCA has a role

1. as a conduct regulatory
2. As a markets regulatory
3. in countering financial crime and
4. in promoting competition

Question 15

What is the Prudential Regulation Authority responsible for?

Answer 15

The PRA is responsible for the prudential regulation of systemically important
firms, including banks, insurers and certain investment firms.

The conduct of business regulation of these firms is still the responsibility of the FCA, so these firms are often referred to as ‘dual-regulated firms’.

Question 16

What are the functions of the FCA in its capacity as markets regulator?

Answer 16

1. Acting as the UK competent authority for the LPDT Rules;
2. Acting as the conduct supervisor and regulator of the financial services business, supervising those firms and writing the rules which those firms must follow.

Question 17

How does the FCA take regulatory action to counter financial crime?

Answer 17

1. Imposing penalties for market abuse
2. Undertaking criminal prosecutions for insider dealing and market manipulation; and
3. Acting as competent authority for the purposes of the Money Laundering Regulations.

Question 18

What is the general prohibition under FSMA?

Answer 18

s.19 FSMA 2000
It is a criminal offence for anyone who is to authorised by the FCA to carry out any regulated activity.

E.g. It would be unlawful for anyone to operate a business offering financial advice or arranging investments without obtaining authorisation.

Question 19

What is the maximum penalty for s.19 FSMA 2000?

Answer 19

2 years in prison and an unlimited fine

Question 20

What’s the law on financial promotions?

Answer 20

s. 21 FSMA 2000

Financial promotions can only be made if allowed by s.21 otherwise the person making the promotion will commit a criminal offence.

Question 21

What is the maximum sentence for financial promotions?

Answer 21

2 years in prison and an unlimited fine.

Question 22

What is the aim of having a restriction on financial promotions?

Answer 22

To ensure that investors, particularly vulnerable and inexperienced investors, are not exposed to misleading sales pitches.

Question 23

What is the criminal offence description under s.21 FSMA 2000?

Answer 23

‘to communicate an invitation or inducement to engage in investment activity’ in the course of business unless the requirements of s.21 FSMA 2000 are satisfied.

Question 24

What are the 2 ways to satisfy the requirements of s.21 FSMA 2000?

Answer 24

1. To have the promotion made or approved by an authorised person, e.g. an investment bank which is authorised and regulated by the FCA.
   The authorised person is expected to ensure that the promotion is clear, fair and not misleading.
2. To rely on an exemption established by statutory instrument under s.21 FSMA 2000.
   E.g covers promotions which are made only to investment professionals, who are less likely to be deceived by a clever but misleading promotion.

Question 25

What are under the remit of ‘misleading statements and impressions’ under s.89 & 90 Financial Services Act 2012?

Answer 25

Criminal offences relating to misleading statements and impression, include:

1. making a statement, promise or forecast which you know to be false or misleading in a material respect
2. recklessly making a misleading statement
3. dishonestly concealing a material fact
4. engaging in a course of conduct which creates a false or misleading impression.

Question 26

What is the maximum penalty for infringing s.89 or s.90 FSA 2012 (‘Misleading statements and impressions’)?

Answer 26

7 years in prison and an unlimited fine.

Question 27

What are the changes introduced by MAR?

Answer 27

1. new market abuse offences of attempted market manipulation and attempted insider dealing
2. an expanded definition of ‘inside information’ for the market abuse behaviours of insider dealing and improper disclosure.

Question 28

Who can commit market abuse offence?

Answer 28

Companies & individuals (like the listed company’s directors)
Only individuals can be found guilty of the criminal offence of insider dealing.