UK Listing Rules reforms: Primary Markets Bulletin 48

In the PMB 48, the FCA:

• confirms the final technical note changes in relation to sponsor competence rules in listing rule 8;
• consults on changes to a number of technical notes in its Knowledge Base to reflect proposed changes to the listing regime;
• consults on the introduction of a new technical note relating to the role of a sponsor when an issuer is able to transfer its listing using a modified process;
• publishes a draft of the new Procedures, Systems and Controls Confirmation Form the FCA proposes to ask applicants for listing to submit with their formal listing application; and
• discusses the timetable for notifying listed companies of their expected new listing category under a remodelled regime for equity shares.

FCA’s approach to updating its Knowledge Base guidance

The FCA is adopting a phased approach to consulting on corresponding changes to the guidance in its Knowledge Base and will initially focus on existing technical notes that it considers the most essential in supporting the understanding of the new UKLR, or most frequently used by market participants. 

The FCA is also proposing amendments to some existing technical notes to address feedback on the sponsor regime referred to in CP23/31. The FCA will consult on amendments to further notes in future editions of its PMB before the new regime becomes effective – some guidance may only be updated after the new UKLR comes into effect.

Sponsor competence

The FCA has made the following consequential amendments to the following technical notes in addition to the sponsor competence requirements announced in Handbook Notice 118:

• Sponsor transactions – Adequacy of resourcing (FCA/TN/709.3) - amended to reflect changes to rule references resulting from the consultation on sponsor competence.
• Sponsors: Guidance on the competence requirements (FCA/TN/714.3) - amended to correct previous errors and aid understanding.
• Sponsors: Practical implications of competence requirements for sponsors and applicants (FCA/TN/715.2) - amended to include examples of the types of experience that the FCA considers as relevant under the corporate finance advisory criterion.

The proposed changes to the sponsor competence requirements on the basis consulted on in CP23/31, announced in Handbook Notice 118, cover:

• extending the requirement for a sponsor to have submitted a sponsor declaration to the FCA from within the previous three years to within the previous five years; and
• allowing competence to be demonstrated through experience gained from providing corporate finance advisory services in the previous five years to issuers with (i) securities admitted (or proposed to be admitted) to a UK recognised investment exchange; and (ii) a market capitalisation of, in the case of commercial companies, at least £30 million.

Guidance in relation to UKLR other than sponsor regime

The FCA plans to amend 11 technical notes, primarily reflecting the proposed changes to the listing regime set out in CP23/31, and to delete the nine technical notes because the relevant rules or requirements are not proposed to be carried over into the UKLR.

Guidance in relation to sponsor regime

The FCA is proposing to introduce a new technical note to help sponsors understand the FCA's expectations in relation to the work they must perform when providing the confirmation in a modified transfer scenario because the form of assurance differs from that typically provided by sponsors in other scenarios.

Procedures, Systems and Controls Confirmation Form

As part of the application for listing process, the FCA is proposing that a company's board provides a signed declaration form confirming that the applicant has appropriate systems and controls in place to ensure that it can comply with its ongoing listing obligations and the listing principles once admitted. 

In CP23/31, the FCA noted its intention to provide guidance to support listing principle 1, to clarify that adequate procedures, systems and controls includes the applicant or issuer being able to explain where information is held and how it can be accessed. The FCA will likely need to elaborate on the type of information being referenced, whilst ensuring consistency with the approach adopted by the Financial Reporting Council in respect of adequate procedures, systems and controls.

Mapping of securities

As noted in CP 23/31, the FCA is proposing to introduce a number of new listing categories for issuers of equity shares and remove the existing premium and standard listing segments.

The FCA is also proposing to send out notifications to issuers, informing them of the category that the FCA expects their securities to be mapped to, should the proposals be implemented, from mid-May. Issuers who believe that they have been incorrectly allocated will have four weeks to respond to the FCA.

Conclusion

The deadline for responding to the FCA's proposed changes to its Knowledge Base is 26 May 2024.

The materials are subject to the FCA board's final decision on whether to proceed with the changes outlined in CP23/31 and the FCA expects to seek board approval of the final rules in June or July 2024. In CP 23/31, the FCA indicated that there would be a two-week implementation period between publication of the final UKLR at the beginning of the second half of 2024 and the new regime coming into force.