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QCA publications and policy updates

This section of the Directors’ Knowhow features all of the publications produced by the QCA and any relevant updates that have occurred over the last month.

QCA and UHY AIM Good Governance Review 2021/22

The QCA and UHY Hacker Young have launched the new AIM Good Governance Review 21-22 which analyses the governance disclosures of 50 small and mid-sized quoted companies and interviews a number of small & mid-cap investors to investigate:

  • Post Covid-19 Recovery 
  • Environmental, Social & Governance 
  • Board Performance Evaluations

If you wish to read the review, please click here.

QCA and YouGov small and mid-cap sentiment survey

The QCA and YouGov published the results of the most recent iteration of the bi-annual sentiment survey towards the end of November. For the first time in the decade-long history of the survey, bank debt overtook equity funding as the most attractive form of external financing for small and mid-sized quoted companies. Previously, the survey, which has been conducted with YouGov since 2011, has maintained a trend of preference for public equity markets. 

In the most recent survey 52% of respondents said they would choose bank debt if they had a need for external financing whereas 39% would choose funding via public markets as their first port of call. 

In terms of general outlook, companies have remained confident in their own prospects. The emergence of headwinds such as supply chain bottlenecks and staff shortages since the last survey has impacted sentiment, however. 

As is the norm, the outlook for the wider economy shows less optimism from companies compared with their view of their own business performance. The aforementioned headwinds have had a greater impact on the view of the wider economy’s performance with that index falling.

To view the survey results, please click here.

Reports, guides and regulation

This section features some of the key legislative/regulatory developments and changes, as well as any new reports or guidance issued by industry bodies or regulators, over the last month.

FCA Policy Statement on the Primary Markets Effectiveness Review

On 2 December 2021, the FCA released its Policy Statement following the conclusion of the consultation period for the Primary Markets Effectiveness Review. The Policy Statement, which will take forward most of the proposals made in the Review, summarises the feedback received, sets out the FCA’s policy response and includes final rules and details of transitional arrangements.

After considering the feedback received during the consultation period, the FCA will be taking forward many of the proposed changes outlined in the consultation paper. The majority of the new rules came into force on 3 December 2021, with the amendments to the primary rule books coming into force on 10 January 2022. The changes include:

Dual class share structures

Regarding dual class share structures, the FCA proposed to introduce a targeted and time-limited form of dual class share structure in the Premium Listing segment. This proposal would introduce a conditional 5-year exception to the current rule that restricts votes on matters relevant to Premium Listing to holders of Premium Listed shares only. The exception applies where the class of share with weighted voting rights meets the following conditions:

  • A maximum weighted voting ratio of 20:1
  • May only be held by directors of the company or beneficiaries of such a director’s estate
  • Weighted voted rights only to be available in two limited circumstances:

    • a vote on the removal of the holder as a director; and
    • following a change of control, in relation to a vote on any matter (to operate as a strong deterrent to a takeover)

  • Weighted voting rights can only be held by directors of the company.

After reviewing the responses, the FCA will maintain the key features of their proposal and implement a targeted form of dual class share structures in the Premium Listing segment.

Minimum market capitalisation

In the consultation, the FCA proposed raising the minimum market capitalisation for companies listing on both the Premium Listing segment and Standard Listing segment from £700,000 to £50 million. The FCA proposed to raise the minimum market capitalisation to £50 million on the basis that they consider companies with a market capitalisation lower than this to be better suited for admission to other markets, such as AIM or AQSE. The FCA also cited resourcing constraints as another reason for looking to introduce a minimum market capitalisation.

However, following the feedback received to the consultation, the FCA has decided to lower the minimum market capitalisation to £30 million.

Free float requirements

The FCA proposed to set a revised level for the minimum value of shares in public hands. This would mean a reduction in free float requirements from 25% to 10% and a removal of the discretionary ability for the FCA to modify the rule to accept a lower level. The FCA also put forward a proposal to require more transparency on free float.

After reviewing the responses, the FCA will finalise its rules as consulted to set a revised 10% level for minimum free float. They will not, however, proceed with the idea to require more specific transparency on free float.

Track record requirements

The FCA stated that they received more compelling evidence to suggest a wider review of this requirement is necessary, rather than relying on a ‘case-by-case’ assessment and potential waivers by exception. The FCA will review the track record obligation as they consider wider reforms to the listing regime in response to the discussion paper.

Minor changes to the Listing Rules, DTRs and Prospectus Regulation Rules

The FCA will proceed broadly as consultation with some minor changes to reflect the feedback it received to the consultation.

We have produced a short note that provides an overview of the background to the review, a summary of the changes that will be made, the QCA’s position and a comparison table.

Please click here to view the note.  

FCA Policy Statement on UK MiFID consultation

The FCA has released its Policy Statement following the conclusion of its consultation on changes to UK MiFID’s conduct and organisational requirements. The aim of the consultation was to improve the availability of research on SME firms and relieve trading venues and brokers from preparing and publishing best execution reports. In June, the QCA responded to the FCA’s consultation, and largely welcomed many of the proposals it contained. The QCA’s response can be found here.

In the Policy Statement, the FCA outlines the changes that they will be making. The key changes relevant to our membership include:

  • Research exemption for small and mid-caps – research on small and mid-cap listed or unlisted companies (SMEs) who have a market capitalisation below £200 million will be exempt from the inducement rules. This means that research on firms below this threshold could be provided by brokers to asset managers on a bundled basis (where asset managers make a single commission payment to brokers covering execution and research) or for free and would not constitute an inducement under the FCA’s rules. The exemption will come into effect on 1 March 2022.

    • The calculation for assessing which companies are under the market capitalisation threshold will change – the calculation will be done once a year averaging market capitalisation for the preceding 24 months to reduce churn on and off the list.
    • The SME exemption will also be extended to cover SME “corporate access” – “corporate access” is the practice of where a broker brings about contact between an asset manager and a company and the broker charges the asset manager for this introduction.

  • Exemption for research providers – research providers will be exempt from the FCA’s inducement rules who do not provide execution services and are not part of a group that includes a firm offering execution services.
  • Clarification on openly available written research – the FCA has clarified that openly available written research would not fall within scope of the inducement rules.

The FCA will also remove certain reporting obligations from 1 December 2021, including:

  • The obligation on execution venues to publish a report on a variety of execution quality metrics to enable market participants to compare execution quality at different venues.
  • The obligation on investment firms who execute orders to produce an annual report setting out the top 5 venues used for executing client orders and a summary of the execution outcomes achieved.

To view the FCA’s Policy Statement, please click here.

FRC on effective stewardship reporting

At the beginning of December, the FRC published a report that analyses the reports from the first signatories to the revised Stewardship Code which was published in September 2021. Overall, the FRC states that the quality of disclosures produced in the areas of governance, resourcing, and the integration of stewardship and ESG factors with investment is good.

However, the FRC highlighted that there are areas of improvement that are needed on particular elements of the disclosures. This includes how stewardship-related conflicts of interest are being managed, how managers review and assure their stewardship activities, and how they monitor and hold to account service providers operating on their behalf.

In light of this, the report outlines key areas of focus for applicants to report on in the future, such as how market-wide and systemic risks are being managed, stewardship in asset classes other than listed equity, detailed reporting on the outcomes of engagement and providing case studies to illustrate both process and impact.

To view the report, please click here.

FRC announces areas of supervisory focus

On 3 December, the FRC announced its areas of supervisory focus for 2022/2023, including priority sectors for corporate reporting reviews and audit quality inspections.

In terms of corporate reporting, the Corporate Reporting Review team will conduct six thematic reviews during the course of next year. The reviews will identify scope for improvements and provide examples of good practice. The six areas will include:

  • TCFD reporting and climate-related reporting in financial statements;
  • Business combinations (IFRS 3);
  • Earning per Share (IAS 33);
  • Deferred Tax (IAS 12);
  • Discount Rates; and
  • Judgments and Estimates.

In terms of audit quality inspections, the FRC has identified several areas of investor and/or public concern. The FRC’s Supervision programme will therefore pay particular attention to the following areas:

  • Climate-related risks
  • Fraud risks
  • Cash and cash flow statements
  • Provisions and contingent liabilities
  • Impairment of assets
  • Revenue
  • Group audits

Finally, the FRC has states that the sectors that it will give priority to include:

  • Travel, hospitality and leisure;
  • Retail;
  • Construction and materials; and
  • Gas, water and multi-utilities.

ISS policy changes

During December, ISS published updates to its proxy voting guidelines (the Benchmark Policy updates) for 2022. The updated guidelines will generally be applied for shareholder meetings taking place on or after 1 February 2022. However, some of the updates are being announced now with a one-year transition period and will become effective in 2023.

ISS’ key 2022 Benchmark Policy updates include:

  • Board accountability on climate – the update includes the introduction of a board accountability policy for the assessment of and focus on the world’s highest greenhouse gas emitting companies.
  • Say on climate management proposals – ISS is codifying the framework developed over the last year for analysing management-offered climate transition plans put up for shareholder approval.
  • Say on climate shareholders proposals – this policy establishes a case-by-case approach towards proposals around a climate action plan and to put such a plan to a regular shareholder vote.
  • Board diversity – ISS is expanding coverage of its board diversity policies with regard to both gender and ethnicity. Changes to the U.K. & Ireland policy phase in the expectation that FTSE 100 boards will have at least one director from an ethnic minority background from 2022, extending to most other U.K. companies by 2024.

To view the updates, please click here.  

FRC report on corporate culture

On 9 December 2021, the FRC published a report on corporate culture that follows on from its 2016 report on corporate culture and the role of boards, the revised UK Corporate Governance Code and its Guidance on Board Effectiveness. The report highlights the views of leading companies and is intended to showcase some of the actions they are taking to better communicate their culture and link it to their strategic objectives.

In conducting its research, the FRC engaged over 134 entities. Its key findings associated with opportunities and enablers to improve culture include:

  • Frameworks and consistency
  • Middle managers and people leaders
  • Positive psychology
  • Language and communication
  • Data and insight
  • Focus on consultation
  • Culture and ambassadors

Its key findings associated with the challenges and barriers to improving corporate culture identified by the FRC include:

  • Cultural heritage
  • Subcultures
  • Impact on individuals
  • Fear of the unknown
  • Mergers and acquisitions
  • Board and leadership changes
  • Clarity and complexity of change.

To view the report, please click here.  

Surveys, projects and questionnaires

This section features surveys or questionnaires submitted by industry bodies or regulators that are relevant to small and mid-size quoted companies.

IASB and UKEB field testing Disclosure Pilot

The UK Endorsement Board (UKEB) in conjunction with the International Accounting Standards Board (IASB) are seeking UK companies to field-test the proposals contained in ED/2021/3 Disclosure Requirements in IFRS Standards – A Pilot Approach (the Disclosure Pilot). This exposure draft proposes to replace mandatory disclosure requirements with an objectives based regime, and proposes amendments to the disclosure requirements in IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits. Field testing provides the opportunity to test the proposals, identify any issues specific to UK companies, and influence the further development of these proposals by the IASB. The UKEB will use the results of field testing to prepare the UKEB Comment Letter to the IASB, and all results of the field testing will be shared with the IASB.

The IASB has recently extended the deadline for the Disclosure Pilot until 12 January 2022, so they are now able to offer a wider and more convenient range of dates for field testing.

Field testing involves testing the IASB’s proposals, by either:

  • preparing mock disclosures applying the proposed requirements for IFRS13 and/or IAS 19; and/or
  • completing a questionnaire about the mock disclosures including questions about application; and/or
  • discussing with UKEB/IASB staff the process or impact of preparing the mock disclosures.

The UKEB are keen to understand the impact of the proposals on companies of all sizes, and are happy to be flexible to find a scope of field testing that fits with your ability to participate.

Please contact the UKEB on if you are interested in participating or would like to learn more about the field tests.


This section provides an update of any recently submitted QCA consultation responses, as well as the consultation responses the QCA is currently drafting.

QCA policy consultation responses

The QCA has recently submitted responses to the following consultations:

  1. HM Treasury: UK Secondary Capital Raising Review (Deadline: 16 November 2021)

The consultation was published following Lord Hill’s recommendation to consider how to improve the efficiency of further capital raisings by listed companies. The consultation reconsidered the 2008 Rights Issue Review Group’s outstanding recommendations, particularly in terms of capital raising models in other jurisdictions and in light of technological advances. The aim of conducting the review is to facilitate a quicker and more efficient process of raising capital for existing listed companies and more easily involve retail investors.

In our response, we stressed the need for the rights issue process to become more time and cost efficient, as well as highlighting several fundraising models used in Australia that could be adopted here in the UK. Furthermore, we also mentioned the need to improve the system of intermediated securities to ensure that companies have easy access to their shareholders and vice versa.

The QCA will be holding a roundtable with Mark Austin (the Chair of the Review) early in the New Year.

To view the response, please click here.

The QCA is seeking views on the below consultation(s):

  1. HM Treasury: Future Regulatory Framework Review (Deadline: 9 February 2022)

This consultation sets out the Government’s response to the initial review, making a series of proposals to deliver the intended outcomes of the FRF Review and build on the UK’s existing framework. The FRF Review includes a proposal to add new growth and international competitiveness objectives for the FCA, as well as a proposal for the principle of sustainable growth to be updated to reference climate change and net-zero economy.

  1. Takeover Panel: Miscellaneous Code Amendments (Deadline: 18 February 2021)

The Takeover Panel published a consultation on Miscellaneous Code Amendments. The consultation seeks views on proposed changes to various provisions of the Takeover Code. Some of the key proposed amendments include:

  • Requiring a publicly identified potential offeror to announce any minimum level it is obliged to offer to offeree company shareholders.
  • Restricting a mandatory offeror from obtaining additional interests in shares in the offeree company in the 14 days up to and including the unconditional date and the expiry of the acceptance condition.
  • Introducing a new Note 5 on Rule 9.5 to clarify the application of the look-back period for determining the minimum price of a mandatory offer.

  1. HM Treasury: Financial Promotion Exemption for High-Net-Worth Individuals and Sophisticated Investors (Deadline: 9 March 2022)

This consultation proposes to retain the Financial Promotion exemptions for high-net-worth individuals and sophisticated investors, but to update them in light of significant economic, social and technological changes. This includes the development of the online retail investment market, price inflation and pensions freedoms, which have eroded the value of the high-net-worth individual exemption thresholds over the last twenty years. This has resulted in a significant number of additional consumer who did fall in scope of the exemptions when they were first created in 2001 or when they were last updated in 2005. In light of this, HM Treasury is proposing that the exemptions are updated through the following means:

  • Increasing the financial thresholds for high-net-worth individuals;
  • Amending the criteria for self-certified sophisticated investors;
  • Placing a greater degree of responsibility on firms to ensure individuals meet the criteria to be deemed high-net-worth or sophisticated;
  • Updating the high-net-worth individual and self-certified sophisticated investors statements; and
  • Updating the name of the high-net-worth individual exemption.

If you have any comments you wish to contribute to the above consultation(s), please get in touch with Jack Marshall, Senior Policy Adviser,

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