Listing regime – latest FCA guidance in Primary Market Bulletin 62

The Financial Conduct Authority (FCA) has published Primary Market Bulletin 62 (PMB 62), its newsletter for primary market participants.

The main topics covered in PMB 62 are the FCA's enforcement cases against Carillion and its former directors (for more detail on the enforcement actions, see our blog post here) and a review of sponsor services provided on transition to the equity shares (commercial companies) category (ESCC). 

Carillion 

The FCA has provided guidance on the key features of the Carillion decisions, in particular in relation to its finding that Carillion and the three former directors "ought to have known" that the statements made in relation to the company's financial performance were false or misleading under Article 12(1)(c) of the EU Market Abuse Regulation (MAR, which was subsequently on-shored as UK MAR as part of Brexit). 

The FCA notes that:

• the test as to whether or not Carillion and the directors "ought to have known" that the information in market announcements was false or misleading is an objective one; and
• the knowledge of a company's directors, as well as other employees or agents, may be attributable to the company itself for the purpose of applying the test.

On the facts the FCA found that in the light of the information reported to the directors by the management team, they were aware of the risk of the market announcements being false or misleading but they did not respond appropriately to this risk, leading to the enforcement actions.

Sponsor services on transition 

As part of the reform of the UK Listing Rules introduced in July 2024 (see our blog post here) the FCA introduced a streamlined admission process for companies transferring from the transition category (previously the standard listing segment) to the ESCC. It has now reviewed the sponsor work undertaken on some of those modified transfers. 

The FCA notes:

• levels of due diligence undertaken by sponsors varied materially but all approaches were appropriate in the specific circumstances;
• some sponsors obtained new, limited scope financial position and prospects procedures reports to support their due diligence, others did not (for example where they had a longstanding relationship with the issuer); and 
• "best practice" involved internal analysis of board experience and training to confirm directors' understanding of the additional responsibilities that would apply once transition occurred, including keeping a record of routine interactions with the board where possible. 

PMB 62 also covers:

• the FCA's concerns in relation to the use of manipulative investment approaches (for example false takeover approaches to manipulate share price) and the role issuers and their advisers play in preventing market abuse; and 
• the FCA's consultation contained in Quarterly Consultation Paper 51 on minor aspects of the new prospectus regime (see our blog post here for more details on this consultation).