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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 Retail Investor Survey


On 23 September, the QCA released the results of a survey it conducted in conjunction with YouGov on retail investment in small and mid-size quoted companies. The report, which surveyed over 500 retail investors, investigates the investment habits of retail investors, and includes practical questions for companies to ask themselves to encourage retail investment in their stocks.


Key findings include:

  • UK retail investors are typically resilient and in it for the long-term, taking a measured approach.
  • Two-thirds of retail investors have changed their investment strategies as a result of the impact of the COVID crisis on the economy.
  • Only 5% of retail investors think corporate governance has no impact on share price. It is viewed as having a positive influence on company management and resulting performance.

To view the report, 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.


New Government measures on insolvency


On 24 September, the Government announced measures from the Corporate Insolvency and Governance Act that have been extended to relieve pressure on businesses dealing with the Coronavirus. The temporary measures to protect businesses from insolvency were due to end on 30 September 2020, but have now been extended. The temporary measures include:

  • Companies with obligations to hold AGMs will continue to have the flexibility to hold meetings virtually until 30 December 2020. This means that shareholders can continue to examine company papers and vote on important issues remotely.
  • Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies.
  • Termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process.
  • The modifications to the new moratorium procedure will be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021

More information can be found here

Reforms to Companies House


On 18 September, the Department for Business, Energy and Industrial Strategy announced reforms to Companies House to clamp down on fraud and money laundering, with directors being unable to be appointed until their identity has been verified. In addition, the reforms will also seek to give businesses greater confidence in transactions.


The reforms have been announced following the outcome of the Corporate Transparency and Register Reform consultation, which the QCA responded to (available here).


As a result of the reforms, compulsory identity verification will be introduced in order to help trace people who are committing fraud or money laundering. Companies House will also be given greater powers to query, investigate and remove false information. These changes will give businesses confidence in who they are doing business with, increasing the level of accuracy of data on the register. Despite these reforms, they will not impact the speed at which a company or organisation is formed, and other filings are completed, with most companies still being able to be incorporated withing 24 hours.


To view the full Government response, please click here.

CMA Competition Law Risk Guide


On 10 September, the Competition and Markets Authority (CMA), in conjunction with the Institute of Risk Management, published their new Competition Law Risk Guide. The guide is to help managers, directors and their advisors comply with the law. The guide provides a basic overview of competition law, outlining the steps businesses and risk professionals can take to help identify and reduce competition law risks. The guide also outlines what to do if competition law has been breached and provides case studies and examples of best practice.



In addition to the above, the guide also covers accountability, highlighting that it is the responsibility of directors to ensure their company is compliant with competition law. 


To view the guide, please click here.

ESMA report on MiFID II


In September, the European Securities and Markets Authority (ESMA) released a report on Trends, Risks and Vulnerabilities. Within the report, ESMA provide evidence of a risk analysis of MiFID II research unbundling.


The report analyses the impact on EU sell-side research of the MiFID II research unbundling provisions that require portfolio managers to pay for the research that they obtain. Concerningly, the report states that it found no material evidence of harmful effects from the rules, highlighting that MiFID II has not led to a significant difference in the number of analysts. The report claims that the recent increases in the number of firms no longer being covered by research analysts appear to be a continuation of a long-term trend. Most worryingly, the report claims that SMEs “do not appear to be particularly affected” in terms of the quantity and quality of research coverage they obtain.


The claims made in the report are in stark contrast to the findings of QCA/Peel Hunt Mid and Small-Cap survey (available here). For instance, the percentage of investors that believe that MiFID II has had a negative impact on liquidity for small and mid-cap stocks has grown from 54% in 2017, to 63% in 2018, to 79% in 2019. The survey, which took soundings from 110 small and mid-size quoted companies and 155 UK-based fund managers, also found that:

  • 54 per cent. of small and mid-cap companies noticed a decrease in the amount of research produced on their company under MiFID II;
  • 82 per cent. of UK fund managers reported seeing less research being produced on mid and small-caps as a result of MiFID II;
  • 70 per cent. believed that MiFID II had had a negative impact on small and mid-cap liquidity;
  • 89 per cent. of investors and 90 per cent. of companies believe that there will be fewer brokers in the next three years; and
  • 99 per cent. of companies believe that MiFID II will be part of the cause of fewer brokers.

The QCA is continuing to work to raise our concerns around the impact of MiFID II, particularly in the small-cap space, and most recently held a roundtable with the FCA to discuss the impact of the regime.


If you wish to read ESMA’s report, you may do so here.

FCA Market Watch 65


In September, the FCA released its 65th edition of their Market Watch newsletter. This edition contains information on market conduct and transaction reporting issues.


The newsletter reiterates the confidentiality of FCA information requirements. That is, they stress that, as part of their review work, they send multiple information requirements to authorised firms and issuers, such as on insider lists, which need to remain confidential. If these requests are not kept confidential they can hinder, or even compromise, the FCA’s review of, and investigations into, suspected market abuse.


To view the newsletter, please click here.

PEG extends additional flexibility


In April, the Pre-Emption Group issued a recommendation that investors, on a case-by-case basis, continue to consider placings by companies of up to 20% of their issued share capital over a 12-month period. This additional flexibility is a temporary measure offered in response to the implications of the coronavirus pandemic and was due to end on 30 September 2020. However, on 4 September 2020, the Pre-Emption Group announced that it will be extending the recommendation to 30 November 2020.


The PEG stresses that if a company seeks to use the additional flexibility:

  • it should only do so if it is experiencing extreme circumstances, and issuance is required to fund an immediate concern;
  • the circumstances of the company should be fully explained, including how it is supporting its stakeholders;
  • effective consultation with a representative sample of the company’s major shareholders should be undertaken;
  • consideration should be given to the effect of the issuance on retail shareholders;
  • the date at which the status of shareholding is assessed for the purposes of pre-emption should be clearly disclosed;
  • company management should be involved in the allocation process; and
  • existing share awards should not be normalised to negate the dilutive effect of the issuance.

To read the announcement, please click here.

KPMG report on director remuneration


As part of their Remuneration Forum, KPMG recently published a report on a survey of directors remuneration in the FTSE Small Cap Market. The report provides insights and analysis on trends of remuneration within companies in this segment of the market. The report provides an overview of the total executive pay package, including basic salary and incentives, as well as providing a review of additional reporting criteria, such as the gender pay gap.


Key findings from within the report, include:

  • There is a heavier weighting towards fixed pay versus that of variable pay. Small Cap companies show a preference towards short-term incentives, such as annual bonuses, for rewarding executives;
  • Over 35% of directors did not receive an annual bonus. A significantly higher proportion than we have seen in previous years received less than 50% of the maximum bonus entitlement. This is a trend we expect to increase in the coming year across the FTSE main market, as the effects of COVID-19 are felt in full; and
  • Performance conditions for annual bonuses continue to focus on the financial, with the EPS and TSR continuing to dominate both annual bonuses and long-term incentives.

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

HMRC report on employee share schemes


In September, HMRC published qualitative research to explore motivations and barriers to the uptake of tax-advantaged share schemes. As part of the research, HMRC commissioned an independent research organisation, who interviewed employers, employees and other market participants to identify the advantages and disadvantages of tax-advantaged share schemes.


The report finds that older employees, with more disposable capital, are more likely to participate in share schemes. It also finds that share schemes are often poorly communicated to employees, meaning that the benefits are not clear to potential participants.


In addition to the above findings, the report suggests a number of improvements, which includes:

  • Improving communication and increasing the level of understanding of share schemes;
  • HMRC to play a role in educating employers of the benefits of share schemes instead of relying on advisers; and
  • Making SAYE option schemes more flexible.

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

FinnCap report on ESG


FinnCap have released a handbook and toolkit on Environmental, Social and Governance (ESG) that explains the key ESG policies, standards and frameworks. In addition, the handbook covers:

  • Who is measuring ESG and what metrics they look at
  • Growth in ESG-driven investing: who is doing it and how it has performed
  • A simple 15-factor ESG scorecard for companies and investors to start making their own assessments
  • Analysis of how sectors currently measure up, leading to some key observations and recommendations
  • Fund manager survey highlighting the momentum behind ESG adoption.

If you wish to view the handbook, you may do so here.

LIBOR transition update


In order to support the transition away from LIBOR ahead of the end of 2021, the regulators, including the Bank of England and the FCA, have been working with market participants to catalyse a transition to using SONIA as the primary interest rate benchmark in sterling markets. As part of this, they have released a summary one-page factsheet, which you can find here. The factsheet explains the phase out of LIBOR, explains what you need to do to prepare for this and provides links to further sources of information.


In addition to the factsheet, the regulators have released a series of educational videos providing background to the key elements of the LIBOR transition, which you can find here.

FCA guidance on listings of cannabis-related businesses


On 18 September, the FCA issued an announcement setting out its new approach to the listing of domestic and overseas medicinal cannabis companies. The statement provides some much-needed clarity for medicinal cannabis and cannabis oil companies that may be considering a listing on the Main Market. 


The statement from the FCA confirms that it will approach the listing of these companies as follows:

  • The FCA will not approve the listing of recreational cannabis companies to the Official List.
  • UK-based medical cannabis companies can be admitted to the Official List if the company has the appropriate Home Office licences.
  • Overseas-licensed medicinal cannabis companies and cannabis oil companies can be admitted to the Official List, provided the FCA is satisfied that the Proceeds of Crime Act 2002 (POCA) does not apply and the company otherwise satisfies the criteria for listing. 

Whilst this only applies, at present, to the Main Market, it is possible that AIM will adopt a similar approach. 

To read more on the statement, 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. 

FRC Lab: call for participants


The FRC’s Financial Reporting Lab is inviting investors and companies to participate in its new project on corporate disclosures on risks, uncertainties and scenarios.


The scope of the project is likely to:

  • explore whether and how companies’ risk identification, risk management and scenario planning processes are evolving and how this is impacting reporting and disclosure.
  • determine whether the time horizons utilised in scenario planning have changed.
  • consider how companies communicate uncertainty in their disclosures.
  • discuss which areas of reporting are most challenging for companies. 
  • explore examples of risks and related disclosures where investor focus has been heightened by the current pandemic (for example, supply chain risk, existential risk/viability of business model).
  • analyse how investors use this information in their decision-making process and identify whether reporting meets investor needs;
  • discuss what types of disclosures would be most useful in interim reports; and 
  • highlight best practice in current company reporting.

If you would like to participate in the project, you can email



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 18 September 2020, the QCA’s Accounting, Auditing and Financial Reporting Expert Group responded to the Audit Committee Chairs’ Independent Forum’s position paper on internal controls over financial reporting.

To view the response, please click here.


The QCA is seeking views on the below consultations:

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.

EuropeanIssuers Webinar


EuropeanIssuers have just launched a Capital Markets Webinar Series Programme, which will consist of 4 webinar sessions taking place in September, October, November, and December. The webinars will cover the following topics: Environmental, Social and Governance, the Shareholder Rights Directive II, Capital Markets and Sustainable Finance.



The first webinar in the series, which is taking place on Tuesday 29 September, will look into how investors, companies, stock exchanges and policy makers can work together to improve the value of ESG disclosure. The webinar will be moderated by Elisabeth Gambert, Director for CSR & International Affairs at AFEP & Co-Chair of EuropeanIssuers Corporate Reporting Working Group.


To find out more information, including on how to register, please click here.


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