'Directors' know how' is a monthly article which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.
The FCA's proposals on dealing commissions could damage research coverage of small and mid-size quoted companies
The Financial Conduct Authority is currently consulting on the use of dealing commissions to pay for research on companies. The discussion paper follows on from a review, which found that there is a lack of price transparency in terms of what research dealing commissions pay for and how much that research costs, as well as an issue with how investment managers value the research they use and/or receive. The FCA has therefore concluded that unbundling research from dealing commissions would be the most effective option to address these issues.
We believe that the proposals put forward by the FCA will decrease the amount of research (which is already limited) on small and mid-size quoted companies and thus be detrimental to their ability to raise finance, grow and create jobs. Small and mid-size quoted companies will be the market players affected the most negatively by the full unbundling of research from dealing commissions. We are currently preparing our response to this consultation and encourage companies to respond directly to the FCA on this issue.
ESMA's consultation on the revised Market Abuse Regulation proposes complex and long insider lists
The European Securities and Markets Authority (ESMA) is currently consulting on its draft technical regulatory standards for the recently revised Market Abuse Regulation. Whilst a broad document, the key area of concern for small and mid-size quoted companies is the proposals on a standardised template for submitting insider lists. ESMA's proposals on the amount of information to be included is much more comprehensive than the current UK regime and includes information such as passport numbers, personal mobile phone numbers, personal email addresses, along with similar work related information.
We are campaigning to have these proposals scaled back. We believe that they could result in insider lists being a significant burden for small and mid-size quoted companies to keep up-to-date, could trigger additional data protection reporting, and, ultimately, go against the original purpose of creating a standardised template – to simplify disclosures for companies. We are encouraging companies to respond directly to ESMA on this point and are preparing a draft template letter for them to use. If you want more information about this, please contact Maria Gomes.
The FRC publishes the revised UK Corporate Governance Code, along with new risk management and going concern guidance
The Financial Reporting Council (FRC) recently published its revised version of the UK Corporate Governance Code, Guidance on Risk Management, Internal Control and Related Financial and Business Reporting and revised auditing standards. This follows on it from consultation in April 2014 on these changes.
A key change is the introduction of the viability statement in the annual report, which includes disclosures on whether they believe they will be able to continue in operation and meet their liabilities taking account of their current position and principal risks and specifying the period covered by this statement and why they consider it appropriate. The FRC has stated that they expect the period assessed to be significantly longer than 12 months.
The revised Code will apply to accounting periods beginning on or after 1 October 2014.