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Directors' Knowhow is a monthly article which highlights changes and updates of relevance to small and mid-size quoted companies.

QCA publications and 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 Annual Review 2019


On 18 October, the Quoted Companies Alliance published its Annual Review for 2019, which you can find here. At the end of the year, QCA membership stood at a record number with 293 firms, of which 202 were quoted companies.


Following on from 2018, Corporate Governance remains high on our agenda after the publication of the updated QCA Corporate Governance Code and the change to AIM Rule 26, which saw over 800 listed companies adopt the code. Work on the code continues as YouGov are currently conducting a study into the code, analysing the costs and benefits for companies who have adopted it.


The QCA remains involved in several campaigns as it continues to strive towards ensuring a proportionate regulatory environment. The Prospectus Regulation, MiFID II, MAR, CSDR and the Short Selling Regulations are all issues that concern our members across all public markets and not just growth markets such as AIM. The QCA’s seven policy Expert Groups continue to work with the QCA on these issues.


If you wish to read the full review, please do so 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.

FRC revised Stewardship Code


On 24 October, the Financial Reporting Council launched a revised and strengthened UK Stewardship Code, which significantly raises expectations for how money is invested on behalf of UK savers and pensioners. The revised code established a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries. The new code aims to protect the interests of savers and pensioners by ensuring that their investments are managed responsibly. Greater emphasis has been placed within the code on creating long-term value.


The key changes to the code include:

  • An extended focus that includes asset owners not previously included, such as pension funds, service providers and insurance companies.
  • A new requirement to report annually on stewardship activities and outcomes, whereby signatories will have to detail their engagement with the assets they invest in and the outcomes of this engagement.
  • Environmental, Social and Governance factors, including climate change, will now be required to take into account.
  • Signatories will now be expected to explain how they have exercised stewardship across all asset classes beyond listed equity, such as fixed income and private equity.
  • A new requirement for signatories to explain their organisations purpose, investment beliefs, strategy and culture and how these enable them to practice stewardship.

If you wish to view the revised Stewardship Code, please do so here.

FRC Lab report on climate-related corporate reporting


The Financial Reporting Lab published a new report on Climate-related corporate reporting on 21 October. In the report, the Lab finds that companies are falling short of investors’ expectations on reporting on climate-related issues. It highlights that there is an increasing gap between the current level of corporate reporting on the topic and investor expectations, especially since the current emphasis on a transition to a low carbon economy.


In order to help improve this, the report provides practical examples about how a company can improve their reporting, as well as helping these companies understand what it is investors want to see them reporting on regarding climate-related issues. The report also provides recommended disclosures and a range of examples of developing practice in relation to the Task Force on Climate-related Financial Disclosures (TCFD).


This report is especially pertinent following the publication of the UK Government’s Green Finance Strategy, which was published in July 2019. This new strategy expects all listed companies and large asset owners to make climate-related disclosures in line with the TCFD recommendations by 2022. The Lab’s report recommends that companies incorporate the TCFD framework within their reporting and they provide guidance to help companies do so.


If you wish to read the report, you may do so here.

FRC strengthens going concern standard


At the end of September, the Financial Reporting Council issued a revised going concern audit standard in response to recent Enforcement cases, as well as high-profile corporate failures where auditor’s reports failed to highlight concerns about the prospects of entities which collapsed shortly after.


The revised standard (ISA UK 570 Going Concern) will increase the work auditors are required to do when assessing whether an entity as a going concern. Auditors will be required to follow significantly stronger requirements than current international standards.


The main changes to the revised standard requires:

  • The auditor to more robustly challenge management’s assessment of going concern and make greater use of the viability statement;
  • Improved transparency with a new reporting requirement for the auditor of public interest entities, listed and large private companies to provide a clearer conclusion on whether management’s assessment of going concern has been appropriate; and
  • Greater consideration and scrutiny of the evidence obtained when the auditor comes to make their decision on going concern.

If you wish to see the revised standard, you may do so here.

Investment Association statement on executive pensions


On 27 September, the Investment Association published a statement on executive pensions stating that companies must set a plan to pay all executive directors the same pension contributions as the majority of their workforce by the end of 2022. Failure to do so, will result in the increased risk of further shareholder dissent. Under the new guidelines, companies with existing directors who are paid more than 25% of their salary as a pension contribution will be given a ‘red top’ – the highest level of warning – unless they have set a credible action plan to bring their contributions in line with the rest of the workforce by the end of 2022.


The changes to the IA’s Institutional Voting Information Service (IVIS) guidelines form part of the IA’s wider work to align executive pension contributions with the rest of employees following changes to the UK Corporate Governance Code and the IA’s Principles of Remuneration.


As a result of the change to the guidelines, the following actions will take place under these specific circumstances:

  • ‘Amber top’ for any company with an existing director who has a pension contribution of 25% of salary or more, but has a credible plan to reduce that pension in line with the rest of the work force.
  • ‘Red top’ for any company with an existing director who has a pension contribution of 25% of salary or more and does not have a credible action plan.
  • ‘Red top’ for any company who appoints a new executive director or a director changes role with a pension contribution out of line with the majority of the workforce

If you wish to see the IVIS Guidelines, please do so here.

ESMA Annual Work programme for 2020


Towards the end of September, ESMA published its Annual Work Programme for 2020. Since being founded in 2011, ESMA’s principle aim has been to build a single rulebook for EU financial markets and establish itself as a credible supervisor. In recent years, its focus has been on two further activities: supervisory convergence and assessing risks.


In so doing, ESMA’s key priorities for 2020 are as follows:

  • ESMA will continue to prioritise the risks and challenges posed by Brexit.
  • In terms of supervisory convergence, ESMA will seek to implement its strengthened convergence and co-ordination powers under the new founding regulation, as well as respond to issues that emerge in the application of the MiFID II framework for secondary markets and investor protection.
  • In the activity of assessing risks, ESMA will focus on ensuring it makes good use of the data collected.
  • In regards to the single rulebook, ESMA has several regulatory tasks to undertake under the European Commission’s action plans on Capital Markets Union, Fintech and Sustainable Finance.

If you wish to see ESMA’s Work Programme, you may do so here.

FCA Primary Market Bulletin


During October, the FCA published its 24th edition of the Primary Market Bulletin. This edition of the newsletter for primary market participants includes an update on Brexit and an overview of the FCA’s proposals in relation to the European single electronic format requirements which apply to issuers on EU markets from 1 January 2020. As well as this, the bulletin includes a discussion of the most recent updates to the Prospectus Regulation, which came into force on 21 July 2019.


In terms of Brexit, the FCA continue to provide updates with new Brexit-related material. This includes:

  • An update to Primary Market Bulletin 21 – Short Selling Regulation and Market Abuse Regulation
  • An update on the FCA’s work on the UK Short Selling Regulation
  • An update to Primary Market Bulletin 22 – Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Rules
  • An update on the use of EU-adopted International Financial Reporting Standards.

If you wish to read the bulletin, please do so here.

HMRC ERS Bulletin


On 3 October, HMRC published its Employment Related Securities Bulletin (ERS). The ERS bulletin provides information and updates on developments relating to ERS, including tax-advantage employee share schemes.


This bulletin includes information on:

·         Net settlement and annual reporting requirements;

·         Notifying HMRC of errors in Enterprise Management Incentive options;

·         Replacement of EMI options and working time requirements;

·         Guidance updates;

·         Save As You Earn extended pause;

·         ERS issues;

·         Stopping a registered scheme; and

·         HMRC’s new contact address for share scheme enquiries.


To view the ERS bulletin, please do so here.

FRC Lab Q3 newsletter


The Financial Reporting Lab published its Q3 newsletter in October. The newsletter provides an update on the projects the Lab has recently published or is currently working on, as well as looking at the other activities the Lab is currently involved in.


The newsletter highlights that, in September, the Lab released its report on disclosures about the sources and uses of cash. The report indicates that investors are not getting all of the information they require about how a company generates and plans to use its cash. The report provides over 20 examples of disclosure in order to help companies enhance the clarity surrounding their annual report. The report also covers linking cash generation and business model, a focus on effective cash key performance indicators, disclosures of capital allocation priorities, dividend resource availability and capital expenditure.


The newsletter also highlights the Lab’s forthcoming Climate and Workforce report, which has since been released. This report outlines what investors want to understand, poses some questions to companies and provides recommendations on specific disclosures. In so doing, the report includes a lot of examples of developing practice in relation to climate-related reporting and aims to help companies apply the principles of the Task Force on Climate-related Disclosures’ framework.


If you wish to see the newsletter, please do so here.

FCA climate change and green finance


On 16 October, the FCA published a feedback statement setting out its proposals to improve climate change disclosures by issuers and information to consumers on green financial products and services. Included within the statements are a number of priorities, which will provide a foundation for the FCA’s future work on climate change and green finance. This includes climate change disclosures for issuers and regulated firms’ integration of climate change risk and opportunities into their decision-making.


The feedback statement sets out key actions, including:

  • Consulting on new rules to improve climate-related disclosures by certain firms and clarifying existing obligations;
  • Finalising rule changes; and
  • Publishing a feedback statement on the joint Discussion Paper with the FRC on stewardship.

If you wish to read the statement, please do so here.

HMT, PRA, FCA memorandum of understanding post-Brexit


On 17 October, the Bank of England, the PRA, the FCA and HM Treasury published a Memorandum of Understanding (MoU) on post-Brexit equivalence and exemption determinations. The MoU sets out how each of the parties will coordinate their respective functions relating to equivalence and exemption determinations. These are new functions that will be transferred to the UK authorities as and when the UK withdraws from the EU.


HM Treasury is responsible for determining equivalence and the application of exemptions to any third country – countries operating outside the EU – where this function is provided for legislation. The other authorities, the Bank of England, the PRA and the FCA, are responsible for providing support to HM Treasury, which includes providing advice and information.


To view the MoU, please click here.

Surveys and questionnaires

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

Survey on companies' interaction with equity markets in the EU


Oxera are currently conducting a survey on behalf of DG Financial Stability, Financial Services and Capital Markets Union at the European Commission to analyse the design and functioning of primary equity markets in the EU which will feed into the Commission’s work on the Capital Markets Union. As part of the project, Oxera and the European Commission are seeking to acquire the views of issuers on their interaction with equity markets. The survey, which has been designed in conjunction with EuropeanIssuers, focusses on the likes of the costs and benefits associated of being listed, the choice of listing venue and the listing process.


If you wish to take the survey, please do so by Friday 1 November 2019. You can take the survey here.

FRC future of corporate reporting


The FRC are currently undertaking a major project on the future of corporate reporting. As part of the project, the FRC has published a survey in order to obtain stakeholders’ views to help shape and improve information for all users of corporate reports. The survey asks stakeholders about their personal experiences and expectations when using company information.


The survey should take no more than 15 minutes to complete. Should you wish to take the survey, please do so by Friday 15 November.


You can find the survey here.


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


Our Legal Expert group contributed to the response to ESMA’s consultation on the Draft Guidelines on disclosure requirements under the Prospectus Regulation, which was submitted on Friday 4 October.


To view the response, please click here.


As well as this, the QCA responded to HM Treasury’s consultation on the Financial Services Future Regulatory Framework Review, which was submitted on Friday 18 October. 


To view the response, please click here.


Additionally, the QCA is currently seeking member input on the following consultations:

  • Law Commission: Intermediated Securities  
  • ESMA: MAR Review Report

If you have any comments you wish to contribute on either of these consultations, please get in touch with Jack Marshall, Policy Adviser,



This section provides information on any upcoming events the QCA may be holding or relevant events that members may be interested in.

FCA SME issuer event


The FCA are hosting the event, Navigating the public disclosure regime as an SME, in order to introduce SME’s to the work of the FCA’s Primary Market Oversight department. The event will aim to help assist companies in navigating the regulatory landscape as a small to medium-sized issuer, particularly with regard to the Market Abuse Regulation (MAR).


The main topics of focus will include:

  • Corporate disclosure of inside information;
  • Relevant policy pipelines
  • Common activities that increase the risk of unlawful disclosure of inside information
  • Corporate transactions
  • Insights from the FRC’s Financial Reporting Lab.

Further details along with registration for the event can be found here.

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