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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 Audit Committee Guide


On 12 September, we published a new and updated version of our Audit Committee Guide. The Audit Committee Guide has been produced to assist audit committee members and, in particular, the audit committee chair, to be effective in their roles. The guide sets out our views of best practices and is to be used as a companion to the QCA Corporate Governance Code.


In particular, the guide focusses on providing general advice and guidance to new audit committee members, who may be unfamiliar with their new role and the tasks to be performed by its members. In so doing, the guide gives insight into:

  1. An effective audit committee
  2. Roles and responsibilities
  3. Risk management and internal control
  4. Relationship with external auditors
  5. The annual cycle
  6. The audit committee report

In addition to the above, the guide provides a work programme for the audit committee and an induction framework information pack.


To download a copy of the guide, please click here.

The role of NEDs in growth companies


On 6 September, the QCA, in partnership with Henley Business School and Downing LLP, launched its new report, The Role of the Non-Executive Director in Growth Companies. The report investigates the differences between the roles of NEDs in growth companies compared to that of NEDs in large companies.


The report highlights how the role, as well as the skills required to be effective, of NEDs in growth companies vary greatly. To this end, the report provides insight on how the size, complexity, type of ownership and stage of development all have an influence on the type of Chair and NED that can add value to the company.


Based on the findings of this study, we believe there are a number of important questions that growth company NEDs and Chairs should ask of themselves to ensure they are performing in their roles, both now and prospectively.


If you wish to view the report, 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.


Implementing MiFID II – multi-firm review of research unbundling reforms


On 19 September, the FCA published the findings of its multi-firm review which indicates that the MiFID II research unbundling rules have worked well for investors. In particular, the review has highlighted that there has been an improvement in asset managers’ accountability over costs, saving millions for investors.


The review found that, following MiFID II coming into effect, most asset managers have chosen to pay for research from their own revenues, as opposed to using their clients’ funds. Other key findings are highlighted below:

  • Investors in UK-managed equity portfolios have saved around £70m in the first six months of 2018 across a sample of firms.
  • Since the reforms, budgets set by firms to spend on research have decreased by 20%-30%.
  • Most asset managers still say they are retrieving the appropriate research.
  • Research of SMEs listed in the UK has not seen a material reduction to date.
  • Wide price ranges are still being offered by brokers.

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

FRC Lab latest report


On 25 September, the Financial Reporting Lab published its latest report: Disclosures of the sources and uses of cash. The report analyses how companies can answer investors’ questions about how a company generates cash and how it intends to use the cash. As well as this, the report provides practical guidance on how a company can give more information and context around its cash disclosures, beyond those in the cash flow statement. This includes business model disclosures, capital allocation frameworks and reverse factoring arrangements, amongst others.


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

NEX Exchange Update Handbook and Rules


Early in September, NEX Exchange published updated versions of the NEX Exchange Growth Market Rules for Issuers, along with the NEX Exchange Corporate Adviser Handbook. Most of the amendments to the Growth Market Rules for Issuers relate to applications for the admission of securities to trading on the NEX Exchange Growth Market. The rules now include an updated version of the suitability review process and the rules now also set out a revised procedure for the submission of application documentation.


If you wish to see the rules for issuers, please click here.


There is also a document with marked changes to the rules, which you can view here.


The Corporate Adviser Handbook has been amended to update the form of the declaration by a NEX Exchange Corporate Adviser, which they have made in an attempt to strengthen the exchange’s anti-money laundering measures.


If you wish to see the marked changes to the handbook, please click here.

FCA encourage firms to prepare for no-deal


The FCA has stepped up efforts to ensure firms are aware of the measures they need to take so that they are prepared for a no-deal Brexit. The FCA will be running a series of adverts as well as setting up a dedicated phone line.


The FCA have stressed that all firms consider the implications of a no-deal Brexit and particularly so for firms that:

  • are a UK business which does any business in the EEA
  • passport into the UK and have not notified the FCA for entry into the Temporary Permissions Regime
  • have consumers in the EEA
  • transfer personal data from the EEA

If you wish to see further details, please do so here.


FRC report on audit firm transparency



A recent report conducted by the FRC has established that transparency reporting by accountancy firms performing audit is currently ineffective. There is also a lack of awareness amongst investors and Audit Committee Chairs that the reports even exist. The FRC’s concern is that transparency reports are being used wrongly as a marketing exercise, which has consequences as it damages their perception amongst stakeholders and limits their usefulness.



The key finding from the report included:

  • 84% of Audit Committee Chairs were not even aware of Transparency Reports
  • 15% of reports were not found on firms’ websites
  • Five of the 33 firms reviewed did not prepare a report at all.

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



IFRS SMEs August Standard Update


At the end of August, the IFRS published their quarterly update for SMEs. The IFRS for SMEs Standard Update is a quarterly summary of news, events and other information about the IFRS for SMEs. The contents within this update includes:

  • An update on the 2019 Comprehensive Review of the IRS for SMEs Standard
  • Discussing the IFRS for SMEs Standard
  • SME implementation Group issues draft Q&A
  • The SME Implementation Group.

To view the SME Standard Update, please do so here.

FRC letter to firms


The FRC has published a letter to firms to assist them with preparations for the UK’s exit from the EU. Specifically, the FRC has written to Audit Committee Chairs and Finance Directors to set out some of the generic actions companies should consider in advance of the UK’s withdrawal from the EU.


To view the letter, please click here.

Polling and MAR


The FCA have published information in response to questions on how the Market Abuse Regulation (MAR) applies to information obtained from electoral polling. The webpage sets out how the FCA expects firms and individuals to handle information that has the potential to be inside information, which could include information obtained as a result of polling.


To view the page, please do so here.


FRC annual report


On 6 September, the FRC published its annual report for 2018/19, which sets out its progress against commitments to tackle poor quality audit, boost enforcement resourcing and improve the overall quality of reporting.


During the 2018/19 period, the FRC revised the UK’s Corporate Governance Code and consulted on updating the UK Stewardship Code to ensure both were made appropriate and fit for purpose. As well as this, the FRC has laid the foundations for the FRC’s transition into the Audit, Reporting and Governance Authority, following Sir John Kingman’s recommendations.


The key highlights from 2018/19 include:

  • Increasing Enforcement resourcing by 25%
  • Revising the UK Corporate Governance Code and consulting on the UK Stewardship Code
  • Establishing the Investor Advisory Panel to complement the FRC’s existing stakeholder outreach.

To read the annual report, please do so here.

Articles, news and speeches


This section features relevant news, articles and publications for small and mid-size quoted companies that has been published in the last month.


FCA – measuring corporate culture


The FCA, along with researchers at the London School of Economics, have developed a method to measure corporate culture. They state that corporate culture is often critical for corporate success and responsibility, yet it is widely seen as impossible to measure in an objective manner. As such, the researchers at the London School of Economics have developed an objective, empirical method to measure corporate culture.


In so doing, they have produced the Unobtrusive Corporate Culture Analysis Tool (UCCAT), which is a scientifically tested methodology for analysing and benchmarking corporate culture. UCCAT analyses publicly available data, such as annual reports, financial records, press releases and databases, all of which are indicative of a company’s cultural makeup. Data points – which have been coined unobtrusive indicators of organisation culture (UICs) – are then extracted from the publicly available data. Each UIC represents an observable and measurable aspect of organisational activity indicative of culture. UICs include: research spending; customer engagement; employee focus; integrity and; transparency, amongst others.


To view the article, please do so here.

FCA speech on state of Brexit preparations


FCA Chief Executive, Andrew Bailey, delivered a speech on 16 September 2019, about preparing for Brexit in financial services. Within the speech, Bailey states the FCA is preparing for a full range of possible outcomes and scenarios, as well as reiterating the FCA’s strong commitment to open global financial markets. As part of this commitment, the regulator remains an active member of ESMA and continues to work closely with other regulatory authorities in the EU.


Bailey then moves on to highlight the main developments and issues that remain in the FCA’s preparations for Brexit. The main developments include:​​​​

  • Legislation and the temporary transitional power;
  • Memoranda of understanding; and
  • The FCA’s programme of work.

The issues that remain include:

  • The Share Trading Obligation;
  • The Derivatives Trading Obligation;
  • Clearing;
  • Uncleared derivatives;
  • Data exchange;
  • Progress on contract repapering; and
  • Retail financial services preparation.

To view the full speech, please click 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


On 13 September, our Financial Reporting Expert Group contributed to the response to the BEIS initial consultation on recommendations by the Competitions and Markets Authority.


To view the response, please click here.


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

  • ESMA: Draft Guidelines on disclosure requirements under the Prospectus Regulation
  • HM Treasury: Financial Services Future Regulatory Framework Review
  • Law Commission: Intermediated Securities  

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

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