Chapter 13: Regulation and Disclosure Flashcards
(135 cards)
1
Q
Why is the regulation and disclosure of corporate information important?
A
Ensures company investors receive the same information to make investment decisions.
Prevents insider trading by ensuring no investors have access to more information than others.
Listed and publicly traded companies must publish price-sensitive information as soon as possible.
Market participants must be informed of any changes to existing forecasts or expectations.
2
Q
How does public disclosure support transparency and accountability?
A
Transparency builds trust between companies and investors by ensuring access to the same level of information.
Proper disclosure practices ensure fair market conditions, preventing manipulation.
Helps maintain regulatory compliance and protects a company’s reputation.
3
Q
What types of information must all companies disclose?
A
All companies are legally required to disclose and update the following:
Company constitution and any amendments.
Directors and company secretaries, including appointments and resignations.
Changes in registered details, such as Company name, Registered office address, SAIL (Single Alternative Inspection Location) address.
Share capital, including new share issues or changes.
Annual accounts and financial statements.
Mortgages and charges affecting company assets.
Persons with significant control (PSC) over the company.
3
Q
Why is it essential for companies to protect personal information?
A
Customers entrust personal data to companies when using services, expecting confidentiality and security.
Mishandling or breaches of personal data can damage company reputation and lead to legal penalties.
Data protection laws, such as GDPR, impose strict obligations on companies regarding the collection, processing, and storage of personal data.
3
Q
What are the requirements for public access to a quoted company’s annual reports?
A
The reports must be:
Accessible to all members of the public (not just company shareholders).
Available throughout the reporting period.
Free of charge
4
Q
How frequently must this information be reported?
A
Companies must notify the Registrar of Companies (Companies House) whenever any changes occur.
Additionally, a confirmation statement must be submitted at least annually to confirm the company’s details are correct.
4
Q
What is the definition of a “quoted company” under the Companies Act 2006?
A
The Companies Act 2006 (CA2006) does not specifically refer to listed companies but instead to quoted companies, which include:
Companies listed on the London Stock Exchange (LSE).
Companies with equity shares listed in an EEA state.
Companies admitted to trading on the New York Stock Exchange (NYSE) or Nasdaq (CA2006 s. 385
4
Q
What additional disclosure obligations do listed companies have?
A
Listed companies must provide additional disclosures beyond the standard requirements.
These include:
More detailed financial statements with enhanced transparency.
Standalone disclosures regarding governance, market-sensitive information, and shareholder communications.
4
Q
What information must be included in the directors’ remuneration report for quoted companies?
A
According to CA2006 ss. 420, 421 & 2008 Regulations Sch. 8, the report must contain:
Statement by the Chair of the Remuneration Committee.
Single total figure table of remuneration for each director.
Details of payments to past directors.
Performance targets for the financial year (if the remuneration policy is not being put to a shareholder vote).
Assessment of the Remuneration Committee’s independence.
Statement on shareholder voting on the remuneration report and policy in the previous year.
A separate section on the directors’ remuneration policy.
4
Q
What additional disclosures must a quoted company include in its strategic report?
A
According to CA2006 s. 414C (7–10), quoted companies must disclose:
Main trends and factors likely to affect future development, performance, or position of the company.
Environmental matters (e.g., sustainability initiatives, carbon footprint).
Employee-related information (e.g., workforce diversity, training programs).
Social and community interests (e.g., corporate social responsibility initiatives).
Company strategy (e.g., long-term goals, risk management strategies).
Business model (e.g., how the company operates and generates revenue).
Gender composition of directors, senior managers, and employees.
Third-party contracts or arrangements essential to the business.
5
Q
How do disclosure obligations differ between premium and standard listed companies?
A
Premium listed companies have more stringent continuing disclosure obligations.
Standard listed companies have fewer requirements and less regulatory burden.
5
Q
What are the business names disclosure requirements for all companies?
A
Companies must display specific details on business stationery, invoices, and emails, including:
Registered name.
Registered office address.
Place of registration (e.g., England, Wales, Scotland, Northern Ireland).
Registered number.
5
Q
What additional details must a quoted company include in its directors’ report?
A
Company’s capital structure and details of holders of securities.
Any agreements related to a change of control or takeover (e.g., shareholder agreements).
Acquisition of the company’s own shares, including purchases and buybacks (CA2006 & 2008 Regulations Sch. 7).
5
Q
Can directors exclude any information from the strategic report?
A
Yes, directors can exclude information if they believe its disclosure would be seriously prejudicial to the company’s commercial interests.
6
Q
When do changes to the remuneration policy take effect?
A
Any changes to the approved remuneration policy do not take effect until they receive shareholder approval.
6
Q
What are the shareholding and independence requirements for listed companies?
A
75% of the business must be independent and controlled by the company.
At least 25% of issued shares (excluding treasury shares) must be held by the public.
A listed company with a controlling shareholder must:
Demonstrate that it can operate independently.
Have a controlling shareholder agreement in place.
Ensure its Articles of Association allow for the election and re-election of independent directors.
6
Q
What additional responsibilities do auditors have when auditing a quoted company?
A
Auditors must include in their report:
Details on the auditable sections of the following:
Directors’ remuneration report.
Strategic report.
Directors’ report.
Corporate governance statement.
6
Q
Do shareholders vote on the directors’ remuneration report?
A
Yes, a resolution must be put to shareholders to approve the report. However, the vote is advisory, meaning that even if it is lost, it does not invalidate directors’ remuneration payments (CA2006 s. 439).
6
Q
What financial information must quoted companies publish on their website?
A
According to CA2006 s. 430, quoted companies must make available:
Annual accounts.
Directors’ remuneration report.
Strategic report.
Directors’ report.
Auditor’s report on the accounts.
These must remain available until the next year’s accounts are published.
6
Q
Can quoted companies issue a summary of their financial statements instead of full accounts?
A
Yes, companies may issue a strategic report and supplemental material instead of full statutory accounts. However, shareholders can request full accounts if they wish (CA2006 s. 426).
6
Q
How often must a quoted company seek shareholder approval for its directors’ remuneration policy?
A
At least once every three years, the company must put forward a resolution to approve:
The existing remuneration policy or any revisions to it (CA2006 s. 439A).
6
Q
What additional documents must quoted companies file with the Registrar of Companies?
A
According to CA2006 s. 447, quoted companies must file:
Directors’ remuneration report.
Auditor’s report on the auditable part of the remuneration report.
Annual accounts.
Directors’ report.
Any separate corporate governance statement.
6
Q
What are the broad categories of disclosure obligations?
A
Listing Principles (LR 7)
Continuing Obligations, which include:
Suspensions, Cancellation & Restoration of Listings (LR 5)
Sponsors (LR 8)
Premium Listing Obligations (LR 9)
Significant Transactions – Premium Listing (LR 10)
Related Party Transactions – Premium Listing (LR 11)
Dealing in Own Securities – Premium Listing (LR 12)
General Obligations – Standard Listing (LR 14)
Disclosure & Control of Inside Information (DTR 2)
Transactions by Persons Discharging Managerial Responsibilities (PDMRs) (DTR 3)
Periodic Financial Reporting Requirements (DTR 4)
Vote Holder & Issuer Notification Rules (DTR 5)
Continuing Obligations & Access to Information (DTR 6)
Corporate Governance (DTR 7)
Primary Information Providers (DTR 8)
6
Q
What are the conditions for holding a general meeting on 14 days’ notice?
A
A traded company may hold a general meeting on 14 days’ notice if:
The meeting is not an AGM (Annual General Meeting).
Electronic voting is available to shareholders.
A special resolution has been passed at the previous AGM or another general meeting approving the reduced notice period.
6
What happens if any of these conditions are not met?
The default notice period is 21 days for general meetings.
6
What is the standard notice period for general meetings of traded companies?
21 days is required for most general meetings.
14 days is permitted only if certain conditions are met (CA2006 s. 307A).
6
What additional disclosures must companies make to obtain and maintain listed status?
Companies seeking listed status must provide additional disclosures to ensure transparency and market confidence. These disclosures must be maintained through adherence to:
Listing and Premium Listing Principles
Continuing Obligations (set out in the Listing Rules and Disclosure & Transparency Rules)
Why is disclosure important in stock markets?
Ensures confidence in the stock market by providing accurate, prompt, and comprehensive information about listed companies.
Prevents insider advantages by ensuring information is released through the authorised channel.
The Company Secretary plays a crucial role in:
Verifying the accuracy and approval of disclosed information.
Ensuring prompt and proper release of disclosures.
Maintaining market confidence through regulatory compliance.
7
What are the Listing Principles applicable to all listed companies?
Chapter 7 of the Listing Rules (LR 7) outlines two general principles applicable to all listed companies:
Companies must take reasonable care to ensure that their business is conducted in a way that protects investors and maintains market confidence.
Companies must communicate information to investors in a timely and accurate manner.
7
What are the additional Listing Principles for Premium Listed Companies?
Premium-listed companies must also comply with six additional principles, which include:
Appropriate Systems & Controls – Must have adequate procedures to comply with listing rules.
Equal Treatment of Shareholders – Ensure all shareholders are treated fairly.
Timely & Accurate Information Disclosure – Any market-sensitive information must be disclosed promptly.
Governance & Management Oversight – Maintain robust governance frameworks.
Directors’ Responsibility for Compliance – The board must take responsibility for compliance with listing obligations.
Investor Protection & Market Confidence – Ensure the company operates in a way that promotes trust and investor confidence.
7
LR 9.6 – Notifications
What documents must be submitted to the FCA for publication?
Two copies of all:
Circulars, notices, or documents covered by the Listing Rules must be sent to the FCA at the time of issue.
Resolutions passed at general meetings (excluding routine AGM business).
A company must notify an RIS when a document is available for viewing, unless the full text is provided to the RIS.
7
When can the FCA suspend a company’s listing?
The Financial Conduct Authority (FCA) can suspend a company’s listing when:
The smooth operation of the market is at risk.
Suspension is needed for investor protection.
A company requests a suspension in writing, providing:
Background and reasons for the request.
Other relevant details required under LR 5.3.
7
What are the circumstances under which the FCA can cancel a listing?
The FCA may cancel a listing when:
Normal trading of the securities is no longer possible (LR 5.2).
Takeovers occur, causing the percentage of shares in public hands to fall below the 25% threshold (LR 6.14).
7
Why do most Premium Listed Companies retain a sponsor?
Compliance Assurance: Ensures compliance with complex regulatory requirements.
Guidance on Transactions: Helps navigate takeovers, mergers, and restructuring.
Market Confidence: Provides assurance to investors and regulators.
7
What is a sponsor, and when is one required?
A sponsor is an FCA-approved adviser who ensures a premium-listed company complies with listing rules.
Premium-listed companies are not required to have a sponsor at all times but must appoint one when:
Making submissions to the FCA.
Seeking guidance on compliance matters.
Engaging in significant corporate transactions.
7
LR 9.2 – Continuing Application
What are the key ongoing requirements for a listed company?
A listed company must:
Have its shares admitted to trading on a regulated market operated by a Recognised Investment Exchange (RIE) at all times.
Notify the Financial Conduct Authority (FCA) when:
It requests an RIE to admit or readmit any shares for trading.
It requests an RIE to cancel or suspend trading of its shares.
Its shares have been cancelled or suspended from trading.
8
LR 9.4 – Documents Requiring FCA Approval
When must employee share schemes be approved by shareholders?
The terms of any employee share scheme or long-term incentive scheme must be:
Approved by an ordinary resolution in a general meeting before adoption.
Exceptions apply where the scheme is open to all or substantially all employees.
When is shareholder approval required for issuing options or warrants?
Shareholder approval is needed if:
Options or warrants are issued at an exercise price below market value (as per scheme rules).
Exceptions:
If the scheme is open to all or substantially all employees.
If the grant relates to replacement options following a takeover or reconstruction.
8
What are the rules for rights issues and open offers?
A rights issue or open offer must remain open for at least 10 business days.
The timetable for an open offer must be approved by the RIE.
If an open offer requires shareholder approval, the circular must not imply that it provides the same entitlements as a rights issue.
8
When must a company offer new shares to existing shareholders?
A listed company issuing new equity shares or selling treasury shares must offer them to existing shareholders in proportion to their holding, unless:
Statutory pre-emption rights have been disapplied under CA2006 s. 561.
The sale relates to fractional entitlements or overseas restrictions in a rights issue.
The shares are being issued to an employee share scheme.
8
What restrictions exist on imposing sanctions on shareholders?
14 days’ notice must be given before any sanctions can be applied.
For shareholdings < 0.25%, sanctions are limited to:
Prohibiting meeting attendance.
Restricting voting rights.
For shareholdings > 0.25%, additional sanctions include:
Withholding dividends.
Restricting transfer of shares.
Sanctions must be lifted within seven days if the required shareholder information is supplied or the shares are sold to an unconnected third party.
8
LR 9.3 – Holders
What are the requirements for proxy voting in listed companies?
A listed company must:
Ensure a proxy form allows for three-way voting (For/Against/Abstain).
State that if a vote indication is not provided, the proxy may exercise their discretion on whether and how to vote.
Provide an option to vote on all directors’ elections together when five or more directors retire by rotation.
8
LR 9.5 – Transactions
What must be disclosed following a rights issue?
listed company must notify a Regulatory Information Service (RIS) of:
The issue price and key terms of the offer.
The results of the issue (including details of any unsubscribed rights sold).
9
What restrictions exist on the discount for share issues?
Shares issued via:
Open offer, placing, vendor placing, or offer for subscription must not be at a discount of more than 10% to the mid-market price at announcement.
Exceptions:
If specific shareholder approval is obtained.
If the issue is made under a pre-existing disapplication of pre-emption rights.
9
What are the requirements for offers for sale or subscription?
Letters of allotment or acceptance must be:
Issued simultaneously and numbered serially.
Equally treated for certificated and uncertificated holdings.
10
What must be included in a circular for a reconstruction or refinancing?
It must contain a working capital statement (under LR 13.3) based on the assumption that the reconstruction or refinancing is successful.
11
What capital changes must be reported to the FCA?
Any proposed changes to capital structure, including listed debt securities.
The number of shares redeemed and remaining outstanding.
Any extension to the validity of temporary documents of title.
11
When must a company disclose changes to its share capital?
The results of a share issue must be announced as soon as known.
Subject to DTR 2, the announcement may be delayed by up to two business days to allow underwriting commitments to be fulfilled.
11
What notifications are required for board changes?
An RIS must be notified by the end of the business day following a decision or receipt of notice of:
New director appointments (including their name, position, and function).
Resignation, removal, or retirement of a director.
No notification is needed if a director retires by rotation and is reappointed.
12
What are the disclosure requirements for changes in accounting reference dates?
Notify an RIS as soon as possible.
If the change extends the financial period beyond 14 months, a second interim report must be issued.
12
What additional disclosures are required when appointing a new director?
Within five business days, the company must disclose:
Current and past directorships of publicly quoted companies (within the last five years).
Any unspent convictions for indictable offences.
Any past insolvency events (liquidations, receiverships, or CVAs) involving companies or partnerships where the director was involved within the last 12 months.
Any public criticism by a statutory or regulatory authority.
Any disqualification orders barring the individual from acting as a director or in management.
12
What must be disclosed when a company changes its name?
Notify an RIS with the effective date of the name change.
Notify the FCA in writing and submit a copy of the Certificate of Incorporation on Change of Name.
12
What must a company disclose regarding dividend payments?
A company must notify a Regulatory Information Service (RIS) as soon as possible after a board meeting that approves:
A decision to pay or withhold a dividend or other shareholder distribution.
The net amount per share payable.
The payment date and record date (if applicable).
Any foreign income dividend election.
Any income tax payable at the lower rate and any amounts that are not repayable.
12
Listing Rule 9.8 – Annual Financial Report
What is required in a company's annual financial report?
The detailed content requirements are provided in Chapter 6 of the Listing Rules.
The annual financial report must comply with statutory and regulatory requirements, including:
Financial statements
Directors’ reports
Corporate governance disclosures
Remuneration reports
12
Listing Rule 9.7A – Preliminary Announcements
What are the requirements for publishing a preliminary statement of annual results?
If a company prepares a preliminary statement of its annual results, it must be published as soon as possible after approval by the board of directors.
The preliminary statement must be agreed with the company’s auditor before publication.
It must include:
Figures in table format, similar to the company’s interim report.
Information that is consistent with the presentation used in the annual report.
12
What is “inside information” under UK MAR?
Inside information is information that:
Is precise.
Has not been made public.
Relates directly or indirectly to a company.
Would significantly affect the price of securities if made public (i.e., a reasonable investor would use it for decision-making).
13
What types of documents must be submitted to the NSM?
Listed companies must submit:
Regulatory announcements (e.g., financial results, major transactions, and changes in shareholding).
Financial statements (annual reports, interim reports, and preliminary announcements).
Other required disclosures under the Listing Rules, Disclosure Guidance and Transparency Rules, or the Prospectus Regulation Rule
13
What is the purpose of the Market Abuse Regulations (MAR)?
MAR aims to enhance market transparency, maintain integrity, and protect investors from market abuse.
It ensures that investors receive equal access to price-sensitive information and that markets function fairly.
13
What changes did MAR introduce in the UK?
The Model Code (which set rules on share dealing by directors) was removed from the Listing Rules.
Increased responsibilities for PDMRs (Persons Discharging Managerial Responsibilities) to disclose transactions.
Greater alignment between MAR and the Disclosure and Transparency Rules (DTR).
13
How does MAR differ from the previous Market Abuse Directive (MAD)?
Market Abuse Directive (MAD)
Legal Structure EU Directive – implemented in national laws (leading to variations)
Approach Minimum requirements, allowing countries to set higher standards
UK Impact The UK went beyond the minimum MAD requirements
Market Abuse Regulation (MAR)
Legal Structure EU Regulation – directly applicable across the EU with no variations
Approach Uniform rules apply across all EU member states
UK Impact MAR replaced the UK's old system, leading to changes in disclosure obligations
13
National Storage Mechanism (NSM)
What is the NSM and why is it important?
The National Storage Mechanism (NSM) is operated by the Financial Conduct Authority (FCA) since April 2020.
It is a repository of regulated information, ensuring public access to important company disclosures.
It holds regulatory announcements and documents indefinitely.
13
How was MAR affected by Brexit?
EU MAR was “onshored” into UK law via the Market Abuse (Amendment) (EU Exit) Regulations 2019.
This retained MAR as UK MAR, with minor modifications to ensure continued effectiveness post-Brexit.
14
What are the disclosure requirements for inside information?
Companies must publish inside information as soon as possible via a Regulatory Information Service (RIS).
The information must also be posted on the company’s website for five years (UK MAR 17(1)).
14
Can disclosure of inside information be delayed?
Yes, disclosure can be delayed only if the company can ensure that:
Immediate disclosure would prejudice legitimate interests.
Delaying disclosure will not mislead the public.
The information remains confidential until disclosed (UK MAR 17(4)).
If disclosure is delayed, the company must notify the FCA immediately after disclosure and provide an explanation if requested.
15
What factors should a company consider in determining if information is inside information?
(DTR 2.2 provides guidance):
The significance of the information relative to the company’s size.
The likelihood that an investor would make an investment decision based on the information.
Whether the company and its advisers consider the information significant.
16
Who can a listed company legally disclose inside information to?
A company can disclose inside information to:
Negotiating parties (or those intended to negotiate).
Company advisers and advisers of any involved party.
Employee representatives or trade unions (if relevant to discussions).
Government departments (e.g., Bank of England, Competition Commission, regulators).
Major shareholders of the issuer.
Company lenders.
Credit-rating agencies.
Caution: If inside information is disclosed to a wide group of external parties, the risk of leaks increases, which could trigger mandatory full disclosure (DTR 2.5.7-9).
16
What is required if inside information is unintentionally disclosed to a third party?
If inside information is disclosed to a third party (e.g., during employment or in a professional setting):
It must be publicly disclosed at the same time (if planned).
If unintentional, it must be disclosed as soon as possible (UK MAR 17(8)).
Exception: Disclosure is allowed if the recipient owes a duty of confidentiality.
16
What is the requirement for website disclosure under UK MAR?
All inside information must be posted on the company’s website for five years (UK MAR 17(1) and 17(9)).
17
What is the FCA's stance on selective disclosure of inside information?
Selective disclosure cannot be justified simply because the recipient owes a duty of confidentiality.
Inside information can only be shared if the recipient needs the information to provide services or advice to the company (DTR 2.5.7).
18
What arrangements must a listed company establish to keep inside information confidential?
Listed companies must:
Restrict access to inside information to those who need it for their role (DTR 2.6.1).
Implement effective confidentiality arrangements within the company.
Be prepared to issue a holding announcement immediately if a leak occurs (DTR 2.6.4)
18
When must a company issue a holding announcement?
If confidentiality is breached or inside information is leaked.
If there is press speculation or market rumours, whether accurate or not, that could affect share price.
19
What framework should companies have for controlling inside information?
Companies should:
Restrict access to inside information to employees who need it for their job.
Maintain insider lists for employees and advisers with access to inside information (UK MAR 18)
20
What types of insider lists must companies maintain?
Deal-Specific or Event-Based Insider List - Created for specific deals or events where inside information is shared. Required for all transactions involving inside information.
Permanent Insider List - Assumes individuals have access to all inside information at all times. Should be very short and only include a few key individuals.
21
What are the requirements for insider lists?
Companies must ensure insider lists:
Are kept in electronic form.
Follow a standard format as required by regulations.
Are retained for five years.
Can be produced to the FCA immediately upon request (UK MAR 18(1)(c), 18(3), 18(5)).
21
What information must an insider list contain?
For each person on the list, the company must record:
Identity of the person.
Reason for being on the list.
Date and time of access to inside information.
Date the insider list was created.
Additionally, the list must be kept up to date, including:
Date/time of any changes in inclusion reasons.
Date/time new persons are added.
Date/time persons no longer have access to inside information.
22
What is insider dealing, and why is it considered a criminal offence?
Insider dealing is the act of trading securities on a regulated market while in possession of non-public, price-sensitive information. It is a criminal offence under the Criminal Justice Act 1993 (CJA1993, s.52) to:
Deal in company securities while in possession of inside information.
Encourage another person to deal while in possession of inside information.
Disclose inside information to someone else, unless done as part of proper professional duties.
23
Who can be classified as an 'insider'?
An insider is anyone who possesses inside information, whether obtained directly or indirectly. Unlike previous laws, under CJA1993, an individual does not need to be connected to the company to be considered an insider.
Examples include:
A director’s spouse who trades shares using inside knowledge from their partner.
Friends of a company employee who receive and act on price-sensitive information.
23
What financial instruments are covered under insider dealing laws?
The definition of securities under CJA1993 (s.54 & Schedule 2) is broad and includes:
Shares
Debentures
Debt securities
Derivatives (e.g., options, futures, swaps)
23
What types of transactions are covered under insider dealing laws?
Under CJA1993 (s.55), insider dealing laws apply to:
Transactions on a regulated market (e.g., the London Stock Exchange).
Deals made via professional intermediaries (e.g., brokers and investment banks).
Private transactions not involving a regulated market or intermediary are usually not covered.
23
What constitutes 'inside information'?
Inside information must meet four key criteria under CJA1993 (s.56):
Specific – The information must be precise and clear.
Company-related – It must relate directly to a company’s securities.
Non-public – It must not be generally available to the public.
Price-sensitive – If disclosed, it would significantly affect the price of the securities.
The law does not define 'significant', leaving room for interpretation.
24
What are the legal defences against insider dealing charges?
Under CJA1993 (s.53), the following defences can be used:
The person did not expect the transaction to result in a profit based on inside information.
They had reasonable grounds to believe the other party also had inside information.
They would have traded regardless of whether they had the inside information.
24
PDMRs (Persons Discharging Managerial Responsibilities)
Who is considered a PDMR under UK MAR?
A PDMR (Persons Discharging Managerial Responsibilities) is defined under UK MAR (Article 1(13) & (25)) as:
A board member (executive or non-executive).
A senior executive with regular access to inside information and the power to influence business decisions.
Not all PDMRs are directors, but all directors are PDMRs.
24
PCAs (Persons Closely Associated)
Who qualifies as a PCA (Person Closely Associated) with a PDMR?
A PCA (Person Closely Associated) includes:
Spouse or equivalent partner under national law.
Dependent children of the PDMR.
A relative who has lived with the PDMR for at least one year.
Entities controlled directly or indirectly by the PDMR or PCA.
Legal persons, trusts, or partnerships managed by the PDMR or PCA.
Entities established for the benefit of the PDMR or PCA.
24
PDMR Share Transaction Disclosures
What are the disclosure requirements for PDMR share transactions?
Under UK MAR 19, PDMRs must notify the following transactions:
Their own share transactions.
Share transactions by their PCAs.
Notification deadlines:
Within three business days: PDMRs/PCAs must notify the company and the FCA.
Within two working days: The company must disclose transactions to the market via an RIS (Regulatory Information Service).
(Updated under Financial Services Act 2021, s.30, effective 29 June 2021)
There is a threshold of €5,000 per calendar year before reporting is required, but voluntary reporting is permitted.
24
What responsibilities do companies have in notifying PDMRs and PCAs?
Companies must:
Notify PDMRs in writing about their disclosure obligations under MAR 19.
Maintain a list of PDMRs and their PCAs.
PDMRs must:
Notify their PCAs in writing and keep a copy of that notification (UK MAR 19(5)).
25
Key Takeaways
Insider dealing is a criminal offence under CJA1993, with penalties for trading, encouraging others to trade, or leaking price-sensitive information.
Anyone with inside information can be an insider, not just company employees.
Inside information is precise, non-public, company-related, and price-sensitive.
PDMRs and PCAs must disclose their share transactions to the FCA and the company.
There is a €5,000 threshold before reporting obligations are triggered.
25
What is a 'closed period' under MAR 19(11)?
A closed period is a 30-day period before the announcement of a company’s full-year or half-year financial results, during which PDMRs are prohibited from dealing in the company’s securities.
26
Why are PDMRs restricted from trading during closed periods?
To prevent insider trading, ensuring that individuals with access to unpublished financial information do not gain an unfair advantage over the market.
26
Can a preliminary announcement of results count as an official disclosure?
Yes, but only if the preliminary announcement contains all key financial data expected in the full-year results.
26
What are the key financial reporting obligations for listed companies?
Annual Financial Report (DTR 4.1.3)
Must be published within four months of the end of the financial year.
A copy must be made available publicly.
This requirement is separate from filing accounts with Companies House.
Half-Yearly Financial Report (DTR 4.2.2)
Covers the first six months of the financial year.
Must be published within two months of the end of the period.
Must be kept publicly available for at least 10 years.
27
What must be included in the Annual Financial Report?
A management report (DTR 4.1.8 & 4.1.9)
Details required under DTR 4.1.11
A responsibility statement confirming:
Financial statements comply with accounting standards.
The statements provide a true and fair view of the company’s finances.
The interim management report fairly reviews company performance (DTR 4.1.12).
27
What must be included in the Half-Yearly Financial Report?
A responsibility statement similar to that required for the annual report (DTR 4.2.10).
A statement confirming whether the report has been audited (DTR 4.2.9).
Disclosure of names and functions of those responsible for the report (DTR 4.2.10).
If the report has been audited, the full auditor’s report must be included.
27
How should companies handle unexpected changes in financial performance?
If a company’s performance materially differs from market expectations, it must promptly:
Issue a profit warning (if underperforming).
Issue a trading update (if overperforming).
Failure to announce material financial changes may result in market abuse violations.
27
Which companies must disclose payments to governments?
Companies operating in:
Extractive industries (e.g., oil, gas, and mining).
Logging of primary forests.
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What are the reporting obligations for such companies?
A report detailing all payments to governments must be published annually (DTR 4.3A.4).
The report must be available for at least 10 years (DTR 4.3A.5 & 4.3A.6).
A copy must be filed with the FCA via the National Storage Mechanism (NSM) (DTR 4.3A.10).
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What are the key shareholder communication obligations under DTR 6.1?
Listed companies must:
Ensure equal treatment of all shareholders.
Provide clear information to help shareholders exercise their rights (DTR 6.1.3-4).
Issue proxy forms with the notice of general meetings (DTR 6.1.5).
Appoint a financial institution to facilitate shareholder transactions (DTR 6.1.6).
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Can companies use electronic communications for shareholder interactions?
Yes, but they must follow specific rules (DTR 6.1.8):
A general meeting resolution must approve electronic communication.
All shareholders must be treated equally, regardless of location.
Identification procedures must be in place to ensure security.
Shareholders must be asked in writing for consent before receiving electronic documents.
Shareholders must have the option to request paper copies.
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What disclosures are required for changes in shareholder rights?
Companies must promptly disclose any changes in:
Shareholder voting rights (DTR 6.1.9).
Loan stock or debt instrument terms (DTR 6.1.12).
Meeting details (e.g., time, place, agenda, voting rights) (DTR 6.1.12).
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Key Takeaways
Closed Periods: PDMRs cannot trade in company securities 30 days before financial reports are announced.
Financial Reports: Annual reports must be published within 4 months of the financial year-end. Half-year reports must be published within 2 months of the period-end.
Profit Warnings: Companies must announce any material deviations from expected performance.
Payments to Governments: Extractive and logging companies must publish annual reports detailing government payments.
Information Requirements: Shareholders must be treated equally and given sufficient information to exercise their rights. Companies may use electronic communication, but shareholders must consent in writing.
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How has the FCA changed its approach to enforcing listing principles?
In recent years, the Financial Conduct Authority (FCA)—and previously the Financial Services Authority (FSA)—has shifted its enforcement focus towards:
Holding boards accountable for failures in governance and control rather than for breaching specific rules.
Penalising poor systems and controls even if no specific Listing Rule has been broken.
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Why has the FCA adopted this approach?
It is easier to prove that a company has failed to maintain appropriate governance and control measures than to prove a direct rule breach.
This allows the FCA to act preemptively to prevent misconduct rather than reacting only after damage has occurred.
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What has been the trend in FCA fines for governance breaches?
Significant increase in fines for failures to comply with listing principles.
Example: Fines have grown substantially over recent years, reflecting the FCA’s stricter enforcement stance.
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What are the key takeaways for listed companies?
Companies must ensure robust governance and control systems to comply with the spirit of listing principles—not just specific rules.
Boards must actively monitor compliance and ensure they can demonstrate effective oversight to avoid enforcement action.
A lack of proper risk management and internal controls can result in substantial penalties, even if no direct rule has been broken.
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Why is trust important in corporate communications?
Trust is essential for maintaining positive relationships with investors, employees, suppliers, and customers.
It ensures stakeholders believe company disclosures and understand the rationale behind decisions.
Without trust, companies risk losing investor confidence, low employee morale, and customer dissatisfaction.
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What is the relationship between transparency, disclosure, and trust?
Transparency – The extent to which a company’s activities and decisions can be observed by external parties.
Disclosure – The act of providing information, either due to a regulatory requirement or voluntarily.
Trust – The confidence stakeholders have in the company’s honesty and integrity.
Good transparency = Effective disclosure + Clear communication
Bad disclosure (e.g., excessive jargon or incomplete information) can damage trust.
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How does disclosure work in practice?
Disclosure can be:
Regulatory – Required by law, e.g., financial statements, governance reports.
Voluntary – Companies choose to disclose additional information to enhance trust, e.g., sustainability reports.
However, disclosure alone is not transparency—it must be clear, relevant, and understandable to the audience.
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What are the key audiences for corporate disclosure?
Companies communicate with three primary groups:
Investors – Need clear financial and strategic information to make informed decisions.
Employees – Require transparency about job security, company strategy, and business outlook.
Customers – Expect clear, honest information about products, services, and corporate values.
Good disclosure benefits all stakeholders and leads to:
Stronger investor confidence – Encourages long-term investment.
Higher employee engagement – Improves productivity and reduces turnover.
Increased customer loyalty – Customers prefer brands that align with their values.
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How can too much disclosure harm transparency?
Excessive information can obscure key messages. Example:
Early remuneration disclosures under The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 provided too much data.
This made it hard for investors to understand actual director pay and compare across companies.
Solution: The 2013 amendments introduced a "single figure" remuneration table with standard calculations, making disclosures clearer and more comparable.
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What role do investors play in corporate transparency?
Investor engagement impacts disclosure quality:
Engaged investors push for clearer, more detailed reporting.
Disengaged investors lead to weaker accountability and less meaningful transparency.
A rise in sustainability reporting reflects growing investor demand for social and environmental accountability.
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Why is transparency important for employees?
Employees are key corporate stakeholders, and transparency affects:
Job satisfaction – Employees feel more secure and engaged when well-informed.
Company loyalty – Informed employees are less likely to leave.
Productivity – Transparency fosters a more motivated workforce.
Example:
A company announces it is ‘exploring opportunities to move work overseas’. Investors hear: "Cost reduction and efficiency." Employees hear: "Job cuts and layoffs." Clear, sensitive communication is crucial to managing perception.
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How does transparency affect customer trust?
Customers expect:
Ethical business practices.
Clear product/service information.
Honest communication about corporate values.
Customers are drawn to companies that align with their social and environmental values.
Example: Businesses promoting sustainability attract eco-conscious consumers.
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What is the role of accountability in corporate governance?
Accountability is not just about blame—it is about:
Risk management – Ensuring stability and responsible decision-making.
Corporate governance – Providing transparency on board actions.
Value creation – Demonstrating responsible stewardship of the company.
Directors of all companies are accountable for:
Their own decisions and actions.
The company’s overall performance.
Listed company boards must follow the Governance Code and disclose:
Decision-making processes.
Board evaluations.
Justifications for re-electing directors annually.
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What are the additional disclosure requirements under CA2006 s. 172?
Directors must explain how they have considered:
Employees’ interests.
Suppliers and customers.
The company’s impact on the environment.
The long-term consequences of decisions.
Purpose: To show that directors balance shareholder returns with broader stakeholder responsibilities.
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Key Takeaways:
Trust is built through clear, honest, and meaningful disclosure.
Transparency is more than disclosure—it requires clarity and accessibility.
Engaged investors push for better corporate transparency and accountability.
Employees and customers value ethical and open communication.
Boards must demonstrate accountability to shareholders and stakeholders.
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What is the FRC’s Clear and Concise Initiative?
The Financial Reporting Council (FRC) launched the Clear and Concise Initiative to improve the clarity and relevance of financial reports.
Purpose:
Ensure reports relay relevant information to investors.
Promote good communication in annual reporting.
Timeline:
Since 2012, the FRC has issued nine reports supporting this initiative.
Some early reports have been overtaken by legislative changes, particularly those on remuneration and audit committee reporting.
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Why is disclosure of dividends important?
Dividends are crucial for both companies and investors, as they demonstrate:
Stewardship – How the company is managing financial resources.
Investment case validation – Investors assess company performance and returns.
Investors prefer dividend disclosures to answer:
Why this policy? – Rationale behind the dividend approach.
What does it mean in practice? – How dividends will be paid.
What are the risks and constraints? – Factors affecting dividends.
What was done to deliver the policy? – Implementation of the policy.
Best practice: Keep all dividend disclosures together instead of spreading them across different financial statements or announcements.
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What do investors look for in business model reporting?
Investors want comprehensive business model descriptions, assuming they know nothing about the company.
A good business model report should include:
What the company does – Core business activities.
Key divisions and legal structure – Breakdown of operations.
Key markets – Geographic and sector focus.
Unique Selling Proposition (USP) – Competitive advantage.
Key assets, liabilities, relationships, and resources – What supports the business.
Revenue and profit drivers – Main sources of income and profit.
Value created for stakeholders – Benefits to employees, suppliers, communities, etc.
Statistical support – Key figures illustrating business importance.
Goal: Help investors understand how the company operates and creates value.
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Why is risk and viability reporting important?
The Annual Financial Statement is the primary source of information for many investors.
Good risk disclosure should include:
Company-specific risks linked to the business model.
Changes in risk over time and their potential impact.
How the company manages and mitigates risks.
Viability Statements aim to improve directors’ understanding of sustainability and resilience.
However, many statements resemble extended going concern statements rather than long-term sustainability assessments.
Investors want:
Long-term risk assessment (beyond the standard 3-5 years).
Better insights into business model resilience.
Best practice: Move beyond compliance to genuine strategic risk discussion.
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What are performance metrics, and why are they important?
Performance metrics allow companies to demonstrate value creation and help investors assess financial health.
Investors expect a range of measures, including:
GAAP financial measures – Standard accounting metrics.
Non-GAAP financial measures – Alternative performance indicators.
Non-financial measures – Environmental, social, and governance (ESG) factors.
Best practice for reporting performance metrics:
Aligned to strategy – Must reflect company goals.
Transparent – Clear definitions and calculations.
In context – Comparisons over time and with competitors.
Reliable – Based on solid data.
Consistent – Used consistently across reports and years.
Goal: Help investors make informed, fair, and balanced assessments.
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How did Brexit affect the UK’s data protection laws?
Prior to Brexit, the UK’s data protection regime was based on EU GDPR (General Data Protection Regulation 2016/679) and the Data Protection Act 2018 (DPA 2018).
After Brexit, the UK onshored or domesticated EU legislation by:
Amending EU GDPR to create UK GDPR through The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019.
Making necessary adjustments to DPA 2018 and PECR (Privacy and Electronic Communications Regulations 2003) to ensure they function effectively in the UK post-Brexit.
UK GDPR now operates separately from EU GDPR, but largely retains the same principles.
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What is the role of the Data Protection Act 2018 (DPA 2018)?
DPA 2018 complements UK GDPR and includes additional provisions specific to the UK.
Key objectives:
Adapt UK data protection laws for the digital age.
Empower individuals to control their personal data.
Provide support for businesses in transitioning to new laws.
Ensure continuity after Brexit in data protection regulation.
Establish stronger penalties for data misuse.
Key elements of DPA 2018:
General Data Processing
Implements UK GDPR standards.
Clarifies definitions and scope in a UK context.
Allows processing of health, education, and social care data while maintaining confidentiality.
Sets age of digital consent at 13 years.
Law Enforcement Processing
Provides specific rules for police, prosecutors, and criminal justice agencies.
Ensures data flow across borders with safeguards.
Intelligence Services Processing
Aligns UK data laws with modern international security standards.
Introduces safeguards for national security investigations.
Regulation & Enforcement
Grants greater powers to the Information Commissioner’s Office (ICO).
Increases fines for data breaches up to £17 million or 4% of global turnover (whichever is higher).
Introduces criminal liability for altering records to prevent disclosure following a subject access request.
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What is the UK’s data protection registration regime?
The Data Protection (Charges and Information) Regulations 2018 require organisations to:
Pay a data protection fee unless exempt.
Be registered with the ICO (Information Commissioner’s Office).
Appear on the public data protection register maintained by the ICO.
Fee Structure (Tier-Based System):
Tier 1 Micro organisations (Turnover < £632k or < 10 staff) £40
Tier 2 SMEs (Turnover < £36M or < 250 staff) £60
Tier 3 Large organisations £2,900
The ICO enforces compliance, and failure to pay the fee can lead to penalties.
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What is PECR (Privacy and Electronic Communications Regulations 2003)?
PECR works alongside UK GDPR but provides additional protections in the area of electronic communications.
PECR covers:
Electronic Marketing – Calls, texts, emails, faxes.
Cookies & Tracking – Regulations for websites tracking users.
Public Electronic Communications Security – Security of data on communication services.
Privacy of Customers – Protecting traffic & location data, billing, and directory listings.
How does UK GDPR affect PECR?
PECR now follows UK GDPR’s stricter consent standards.
Companies using electronic marketing must comply with both PECR and UK GDPR.
Key difference: PECR applies even when personal data is not being processed, whereas UK GDPR applies only to personal data.
PECR protects both individuals and companies, while UK GDPR only protects individuals.
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What is UK GDPR, and how did Brexit impact its implementation?
UK GDPR is the retained version of the EU GDPR following Brexit. It was originally implemented across the EU in May 2018, but after Brexit, the UK onshored it, making adjustments for UK-specific regulations. It represents a significant step forward in data protection, designed for the modern digital age, particularly in response to companies like Facebook and Google and the rise of big data analytics.
Key post-Brexit impact:
UK GDPR is separate from EU GDPR but remains similar in content.
UK companies processing data related to EU citizens or operating in the EU must comply with both UK GDPR and EU GDPR.
February 2021: The European Commission issued draft adequacy decisions, confirming the UK GDPR regime as adequate for data exchange between the UK and the EU.
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What are the seven key principles of UK GDPR?
UK GDPR is principles-based rather than rule-based, meaning organisations must design their policies to comply with these principles:
Lawfulness, fairness, and transparency – Data processing must be legal, fair, and clear to data subjects.
Purpose limitation – Data must only be collected for specified, explicit, and legitimate purposes.
Data minimisation – Only collect necessary data, not excessive information.
Accuracy – Personal data must be accurate and kept up to date.
Storage limitation – Data should only be kept as long as necessary for its intended purpose.
Integrity and confidentiality (security) – Data must be protected against unauthorised access, loss, or damage.
Accountability – Data controllers must demonstrate compliance with all GDPR principles.
Few exceptions exist, e.g., processing for national security or purely personal/household activities.
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Who does UK GDPR apply to?
‘Controllers’ – Decide how and why personal data is processed.
‘Processors’ – Act on the controller’s behalf to handle personal data.
Key obligations:
Processors now have direct legal responsibilities (unlike in previous laws).
Controllers must ensure that processors (including third-party service providers) comply with UK GDPR, even if the processing occurs outside the UK.
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What constitutes ‘personal data’ under UK GDPR?
UK GDPR has expanded the definition of ‘personal data’.
Previously, only email addresses, names, and phone numbers were considered personal data.
Now, it includes IP addresses, online identifiers, and biometric data.
Personal data applies to:
Automated data processing (e.g., digital records, AI analytics).
Manual data processing, if the information is part of a structured filing system.
Personal data must:
Directly identify an individual (e.g., name, date of birth).
Indirectly identify an individual when combined with other information (e.g., access card logs linked to employee records).
UK companies operating in the EU or processing EU citizen data must also comply with EU GDPR.
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How do UK GDPR and EU GDPR compare?
UK GDPR
Applies to UK-based data controllers/processors
Cross-border Data Transfers requires UK’s adequacy decision
Regulator Information Commissioner’s Office (ICO)
Fines for Breaches Up to £17M or 4% of global turnover
Legal Basis for Processing Same six lawful bases
EU GDPR
Applies to EU-based controllers/processors + those handling EU citizens’ data
Cross-border Data Transfers Requires Standard Contractual Clauses (SCCs) for non-EU transfers
Regulator European Data Protection Board (EDPB)
Fines for Breaches Up to €20M or 4% of global turnover
Legal Basis for Processing Same six lawful bases
UK and EU GDPR are nearly identical, but UK-specific rules may diverge over time.
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What are the six lawful bases for processing personal data?
Organisations must justify data processing under one of six lawful bases:
Consent –
Must be explicit, informed, and freely given.
Pre-ticked boxes or opt-out mechanisms are not valid.
Individuals have the right to withdraw consent at any time.
Contractual Obligations –
Data processing is necessary to fulfil a contract (e.g., processing customer data to provide a service).
If an alternative exists that does not require personal data, processing is not allowed.
Legal Obligations –
Data processing is required to comply with the law (e.g., tax reporting, employment records).
This applies to statutory records (e.g., confirmation statements filed with the UK Registrar).
Vital Interests –
Processing is necessary to save someone’s life.
Rarely used outside medical emergencies and law enforcement.
Public Task –
Processing is required for tasks in the public interest (e.g., government departments, Crown functions, law enforcement).
Legitimate Interests –
Processing is required for the legitimate business interests of the controller or a third party.
Balances business needs against individuals' fundamental rights.
Most flexible category, but requires justification and risk assessment.
Processing without a lawful basis is illegal and subject to penalties under UK GDPR.
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What are the seven GDPR principles?
Lawfulness, fairness and transparency
Purpose limitation
Data minimisation
Accuracy
Storage limitation
Integrity and confidentiality (security)
Accountability
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GDPR is supplemented in the UK by which additional legislation?
Data Protection Act 2018, Privacy and Electronic Communications Regulations
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What rights do individuals have under the Data Protection Act 2018 (DPA2018)?
DPA2018 grants individuals the right to access and control their personal data held by organisations, including:
Key Rights:
Right to know how their data is being used.
Right to access their personal data.
Right to request correction of inaccurate data.
Right to request data deletion (‘right to be forgotten’).
Right to restrict data processing.
Right to data portability (transfer personal data between services).
Right to object to certain types of data processing, including automated decision-making and profiling.
Requests do not require a specific form – individuals can write to an organisation, identify themselves, and request their data.
Timeframe for response:
Organisations must provide the requested data within one month.
If the request is complex, they can extend this to three months, but must inform the individual within one month and explain why extra time is needed.
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Are there any circumstances where an organisation can refuse a data request?
Yes, data can be withheld without explanation if it relates to:
Prevention, detection, or investigation of a crime.
National security or armed forces operations.
Tax assessment or collection.
Judicial or ministerial appointments.
Fees:
Most requests are free.
A small fee may apply if the request involves a large amount of data or is complex to process.
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What information are employers legally allowed to keep on employees?
Employers are permitted to hold basic employee records without consent, including:
General Employee Data:
Name & address
Date of birth
Sex
Education & qualifications
Work experience
National Insurance number
Tax code
Emergency contact details
Employment history
Employment terms & conditions
Workplace accidents
Training records
Disciplinary records
‘Sensitive’ personal data requires explicit employee consent and includes:
Race & ethnicity
Religion
Political opinions or memberships
Trade union membership
Genetic or biometric data (e.g., fingerprints)
Health & medical conditions
Sexual history or orientation
Employees have the right to know:
What records are kept and how they are used.
Confidentiality rules for those records.
How records can support their training & career development.
Employees can request a copy of their records, and employers must respond within 30 days.
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What is the Freedom of Information Act (FOIA2000)?
FOIA2000 provides public access to government-held information and applies to public authorities such as:
Government departments
Local councils
NHS bodies
State schools & universities
Police forces
Two ways public authorities must provide information:
Proactively publishing key information about their activities.
Responding to individual requests from the public.
Anyone can make a Freedom of Information (FOI) request – individuals do not need to explain why they want the information or how they will use it.
Valid FOI requests must:
Be in writing.
Include the applicant’s name & correspondence address.
Clearly specify what information is being requested.
Public authorities have 20 working days to respond.
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Can public authorities refuse an FOI request?
Yes, information can be withheld if:
Its release is prohibited by other legislation.
It is already publicly accessible under different laws.
Public authorities must:
Confirm whether they hold the requested information.
Provide the requested data unless there is a legal reason to withhold it.
Routine operational queries (e.g., checking office hours) do not require a formal FOI request and can be answered normally.
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Key Takeaways:
Individuals have strong rights under DPA2018, including data access, correction, and deletion.
Employers can retain basic employee data but must obtain consent for sensitive information.
FOIA2000 allows public access to government-held information, with some exemptions.
Public bodies must respond to FOI requests within 20 working days.
Data protection and FOIA laws ensure transparency and accountability while balancing privacy and security.
