FCA to remove temporary measures for issuers introduced due to pandemic
In the 39th edition of the Primary Market Bulletin (PMB), the UK Financial Conduct Authority (FCA) announces the removal of the temporary measures it introduced in 2020 allowing for delayed annual and interim financial reporting, as well as rescinding the temporary measures regarding working capital statements and General Meetings.
In 2020, in response to the pandemic, the FCA acted with other regulators to introduce a series of measures to help companies and their auditors ensure information continued to flow to investors and support the continued functioning of the UK’s capital markets. The regulator announced most of these measures in a broader statement about recapitalisation issuances during the coronavirus crisis in April 2020.
Although the effects of Covid-19 are still being felt, the FCA considers that practice has evolved sufficiently so that issuers and their advisors are now able to return to previous practices and methods of publishing appropriate financial information to support investor decision-making.
The FCA says:
“We consider that we can now also rescind the temporary measures regarding working capital statements and General Meetings that we put in place to assist companies raising new share capital”.
On 26 March 2020 the FCA announced temporary relief to allow issuers an additional 2 months to publish their annual financial reports. This was followed on 27 May 2020 with further temporary relief to allow issuers an additional month to publish their half yearly financial reports (interims).
These temporary reliefs will no longer be available for reporting periods ending on or after 28 June 2022.
Issuers subject to DTR 4 are required to publish their annual financial reports within 4 months of their financial year-end (DTR 4.1.3R). If they do not meet this deadline, the FCA expects issuers to request a suspension of their listed securities. Should they not make this request, the FCA can impose a unilateral suspension if the smooth operation of the market is, or may be, temporarily jeopardised or it is necessary to protect investors (section 77 FSMA and LR 5.1.1R).
Issuers subject to DTR 4.2 are required to publish their half yearly financial reports within 3 months of the end of the relevant reporting period (DTR 4.2.2R). If they do not meet this deadline, the FCA expects them to request a suspension of their listed securities. If they do not make this request, the regulator can impose a unilateral suspension if the smooth operation of the market is, or may be, temporarily jeopardised or it is necessary to protect investors (section 77 FSMA and LR 5.1.1R).
On 8 April 2020 the FCA temporarily amended its approach to the disclosure of working capital statements in prospectuses and circulars approved by the FCA in light of the uniquely challenging circumstances created by the outbreak of the pandemic. This temporarily revised approach permitted issuers, under certain circumstances, to disclose their key assumptions on business disruption during the pandemic without requiring the inclusion of a qualified working capital statement.
The FCA says it will no longer approve prospectuses or circulars that use the temporarily revised approach to working capital statements after 28 June 2022.
During the pandemic, the FCA recognised that issuers may have been facing challenges in holding the general meetings which the Listing Rules require in a number of instances.
To address the challenges faced by issuers, on 8 April 2020 the FCA announced a temporary modification to its Listing Rules on a case by case basis with regards to Class 1 transactions (LR 10.5.1R(2)) and Related party transactions (LR 11.1.7R). Premium listed companies undertaking a transaction within the scope of this policy could apply to the FCA for a dispensation from the requirement to hold a general meeting, subject to certain conditions.
The FCA will no longer grant dispensations from the requirement to hold General Meetings on this basis from 28 June 2022 and the relevant technical supplement will no longer be applied.