Welcome to the latest edition of Osborne Clarke’s quoted company legal and regulatory news update.
We hope that you find it interesting. If you would like to discuss any of the content, or have a subject that you would like us to cover in next month’s edition, please let one of us know. Our contact details are set out below.
Jon King, Mark Wesker, Tom Harvey and Nick Thody
Which digital media formats and channels do investors prefer for company reports?
Listed companies make their report and accounts available in a variety of digital formats, and the Financial Reporting Council’s “Financial Reporting Lab” has recently published an interesting paper looking at which online formats are preferred – and disliked – by institutional and retail investors. The Lab’s paper also contains some useful tips on the digital presentation of company accounts, and discusses the role of digital media in company reporting more widely, including the perils of investor relation videos and apps.
ECM, DCM, M&A: Regulator issues terms of reference for its investment and corporate banking study
The Financial Conduct Authority has published the terms of reference for its market study into competition in investment and corporate banking. The market study will, in the FCA’s words, “explore whether competition for investment banking and corporate banking is working well“. It will focus on “primary market and related activities provided in the UK by the investment and corporate banking industry. Primary market activities cover Equity Capital Markets, Debt Capital Markets, mergers and acquisitions and acquisition financing. Related activities (e.g. corporate broking and lending, ancillary services) will be considered insofar as they affect competition for primary market activities“.
The study will examine three linked topics: the choice of banks and advisers faced by clients when selecting services; limited transparency in the provision of services; and the practices of bundling and cross-subsiding activities within primary market activities and between primary market and related activities.
Failure to manage and disclose RPTs = £4.6m fine for premium listed company
The Financial Conduct Authority has issued its final notice to Asia Resource Minerals plc, in which it imposed a fine of £4.65m for various breaches of the Listing Rules and the Disclosure and Transparency Rules. The breaches principally relate to a failure to appropriately manage and disclose related party transactions involving the company’s Indonesian subsidiary, amidst a “breakdown in management oversight” of its business generally.
We look at the FCA’s decision and the lessons that can be learned by other listed companies (and especially those with overseas operations) to ensure that appropriate procedures are in place, and are effectively implemented, to enable compliance with their regulatory obligations.
“Inside AIM” re-emerges: London Stock Exchange publishes guidance on free float and a reminder on systems, procedures and controls
After a hiatus of just under three years, AIM Regulation has published its latest edition of “Inside AIM”, its newsletter for providing advice to AIM market participants on technical issues arising from the AIM rulebooks.
The new edition covers the issue of free float in connection with a company’s appropriateness for AIM. There is, of course, no formal free float requirement for AIM quoted companies, but the Exchange emphasises that sufficient free float is fundamental to the orderly trading and liquidity of securities once admitted to AIM and, therefore, inextricably linked to the company’s appropriateness to be admitted to AIM.
The newsletter also gives a gentle reminder of the role that nominated advisers are expected to take to ensure that an applicant’s systems, procedures and controls are up to scratch.
FRC discussion paper on improving quality in smaller listed and AIM company reporting
The Financial Reporting Council has produced a discussion paper on improving the quality of financial reporting by smaller listed (being Main Market companies with a market cap of between £20m and £100m) and AIM quoted companies.
In its paper, the FRC seeks to change the perception of many smaller public companies, which, in the FRC’s words “think that investors do not read their annual reports and therefore the reports are of limited value“. The FRC identifies some of the practical difficulties that smaller public companies can face in successfully exploiting the opportunities presented by annual reporting, and proposes ways in which the FRC can help overcome these.
AIM at 20: the highs, the lows, and the point about risk capital
Much of the media comment around AIM’s 20th birthday was negative, focusing on the several corporate shambles that the market has undeniably seen. But we felt that much of that comment missed the point: that, as we say in our blog, “Companies have raised £92 billion on AIM since its inception…it is a growth market, where young companies raise risk capital. Approached in that light, the London Stock Exchange should be congratulated for succeeding where many other exchanges have failed: creating a vibrant junior market“.