Regulation and disclosure Flashcards
What are the 2 general listing principles for all listed companies in Chapter 7 of the Listing Rules issued by the FCA?
What are the 6 premium listing principles?
LP1. Listed company must take reasonable steps to establish and maintain adequate procedures, systems, and controls to enable it to comply with its obligation
LP2. Listed company must deal with the FCA in an open and co-operative manner
Listed comapnies must:
PLP1. Take all reasonable steps to ensure directors understand their responsibilities and obligations
PLP2. Act with integrity towards holders and potential holders of its premium listed equity securities
PLP3. All premium listed equity shares in a class must carry an equal number of votes
PLP4. If more than one class, the voting rights in each class should be proportionate to the interests of those classes in the company’s equity
PLP5. Ensure company treats all holders of the same class equally
PLP6. Communicate information to holders and potential holders of its premium listed equity securities to avoid a false market
LR 9.2 - CONTINUING APPLICATION
What must a listed company at all times have?
What percentage of the company’s business must be independent and controlled by the company?
What percentage of the issued shares must be controlled by the public?
Shares admitted to trading on a regulated market operated by a recognised investment exchange (RIE) and must notify the FCA that it has requested an RIE to admit shares to trading
75%
25%
LR 9.3 - HOLDERS
A listed company must not prevent its shareholders from exercising what rights?
A company proposing to issue further equity shares or to sell treasury shares must do what?
Their rights by proxy = proxy forms must be 3 way voting
Offer them to existing shareholders in proportion to their holding, unless:
1. a general disapplication of the statutory pre-emption rights has been given ; or
2. where the sale is to an employee share scheme
LR 9.4 - DOCUMENTS REQUIRING FCA APPROVAL
Companies must ensure that the terms of any employees’ share scheme or long-term incentive scheme are what? (unless what?)
Companies must not issue options or warrants where the exercise price is less than the market value as determined in accordance with the scheme rules without what?
Approved by shareholder ordinary resolution in a GM before being adopted (unless all employees are eligible to participate in scheme on similar terms)
Member approval by ordinary resolution in GM
LR 9.5 - TRANSACTIONS
As soon as practical, following completion of a rights issue, the company must notify an RIS of what 4 things?
How long must rights issues and open offers remain open for acceptances?
- the issue price of the offer
- principal terms of the offer
- results of the issue
- date and price at which any unsubscribed rights were sold (if any)
For at least 14 days (10 business days)
LR 9.6 - NOTIFICATIONS
How many copies of all circulars, notices, resolutions passed at GMs, or other documents to which the Listing Rules apply must listed companies forward to the FCA?
Following the appointment, resignation, removal, or retirement of any director, who must a listed company inform and when?
In respect of the appointment of a new director, what 2 pieces of information must be disclosed and when?
What are the 2 other instances when a company must notify the RIS?
2 copies to the FCA
a Regulatory Information Service (RIS) must be notified no later than the end of the business day following the decision of any change to the board
Disclose to RIS no later than 5 business days of decision to appoint them:
1. details of all current directorships of publicly quoted companies held during last 5 years
- whether the director has ever been disqualified by a court from acting as a director
i. when company changes its name (also notify FCA in writing and forward FCA a copy of certificate of incorporation on change of name)
ii. change in ARD
How can trust be accomplished?
What 2 things does trust rely on?
What does transparency refer to?
What 3 things does transparency rely on?
Is disclosure on its own transparency?
Only be accomplished if stakeholders believe what they are told by company and understand the reasons behind any particular decision that affects them
Trust relies on data and intent = communication is more likely to be effective if the intention is to inform the reader rather than merely meet a disclosure requirement
Transparency = the ease with which an outsider is able to make a meaningful analysis of an organisation and its actions, both financial and non-financial
Relies on a combination of information disclosure, clarity of communications, and accuracy of information
No, the communication of the information needs to be clear and free from jargon
What are the 3 main focuses of company communications and why?
Why can investors’ expectations have a significant effect on the quality of corporate communications?
What are directors accountable for collectively and individually and in what 3 ways is this done?
- Investors = persuade them to invest and hold onto shares in long-term
- employees = well-informed workforce more likely to have a positive attitude to employer = increase productivity, decrease employee turnover
- Customers = attracted to companies demonstrating the same environmental and social ethos that they themselves have
Disengaged investors = don’t bring pressure on companies to make better disclosures
Engaged investors = leads to fuller disclosures
Accountable generally as a board for the actions and decisions of the company and accountable individually for their own actions and decisions
1. Strategic report and S.172 statement
2. UK CG Code for listed companies (evaluate own performance and explain good governance)
3. Directors of listed companies are recommended to offer themselves for re-election by members each year (so shareholders can hold individual directors to account)
What is the FRC’s Clear and Concise annual reporting initiatives’ main aim?
What are the 4 sections of this initiative?
To ensure that the reports relay relevant information to investors and promote good communication
- Disclosure of dividends
- Business model reporting
- Risk and viability reporting
- Performance metrics
FRC’S CLEAR AND CONCISE INITIATIVE - DISCLOSURE OF DIVIDENDS
Investors have indicated that a good dividend disclosure combined with a description of the dividend policy will cover what issues? (4)
Investors have expressed a preference for the dividend disclosures to be what in the annual financial statements?
- Why this policy?
- What will the policy mean in practice?
- What are the risks and constraints associated with this policy?
- What was done in practice to deliver under the policy?
grouped together rather than spread out
FRC’S CLEAR AND CONCISE INITIATIVE - BUSINESS MODEL REPORTING
Investors prefer that companies should assume that the reader knows nothing about the company and should provide a comprehensive description of the business model including what? (4)
FRC’S CLEAR AND CONCISE INITIATIVE - RISK AND VIABILITY REPORTING
What are investors looking for? (2) (risks and information)
Why?
- What the company does
- Its USP
- Key revenue and profit drivers
- Value created for stakeholders and the benefits this brings to the company
Investors are looking for:
A. company-specific risks linked to the business model, disclosing how the risks have changed over time and what the impact of risks occurring might be; and
B. information on the sustainability of the business model and company’s resilience to risks it faces
This info is vital to investors’ understanding of the underlying business
FRC’S CLEAR AND CONCISE INITIATIVE - PERFORMANCE METRICS
Why are performance measures essential? (2)
What measures do investors prefer?
Whichever measures are chosen, they should all meet what 5 principles?
Essential:
A. for companies and directors to demonstrate the value they create
B. to how investors value companies
Prefer a range of measures covering financial measures and non-financial measures, being a combination of standard and company-specific measures
- aligned to strategy;
- transparent;
- in context;
- reliable; and
- consistent
DATA PROTECTION
UK General Data Protection Regulation is supplemented in the UK by which 2 additional legislation?
What are the 2 differences between GDPR and PECR?
i. Data Protection Act 2018
ii. Privacy and Electronic Communications Regulations 2003
A. PECR apply even in circumstances where personal data is not being processed; and
B. GDPR focus = providing protection to individuals
PECR rules give protection to companies as well as individuals
DATA PROTECTION
What does the Data Protection Act 2018 do in addition to UK General Data Protection Regulations? (4)
- Makes UK data protection laws fit for the digital age
- Empowers people to take control of their data (providing them with new rights to move or delete personal data)
- Supports UK businesses and organisations through this change
- Provides a modern framework for data protection in the UK, with stronger sanctions for malpractice
DATA PROTECTION - DPA2018
What are the 5 main elements of the Data Protection Act 2018 and an example of each element?
- General data processing = Implements UK GDPR standards across all general data processing.
- Law enforcement processing = Provides a bespoke regime for the processing of personal data by the police, prosecutors, and other criminal justice agencies
- Intelligence services processing = Ensures that the laws governing the processing of personal data by the intelligence services remain up-to-date and in line with international standards
- Regulation and enforcement =Allows Commissioner to administer fines and bring criminal proceedings in certain situations
- Registration regime = every organisation or sole trader that processes personal information must pay a data protection fee, unless they are exempt
○ Fee depends on the size of the company (micro, small/medium, or large)
