Susan Fadil, our UK Head of Corporate Secretarial, gives an update on the regulatory trends and changes in the UK compliance market.
Listing Rules FCA Final notice for breaches of LRs and DTRs
On 20 January 2015 the FCA published a final notice imposing a fine of £539,800 on Reckitt Benckiser Group Plc (“Reckitt Benckiser”) for breaches of the Listing Rules and Disclosure and Transparency Rules in relation to inadequate systems and controls and failure to identify breaches of the Model Code relating to share dealings by senior executives in its own shares, leading to breaches (between 1 July 2005 and 8 October 2012) of:
- LR 9.2.8R (failure to require persons discharging managerial responsibilities to take all reasonable steps to secure their compliance with the Model Code).
- Listing Principle 1 (failure to take reasonable steps to enable its directors to understand their responsibilities and obligations to comply with the Model Code, resulting in a breach of the Model Code) and Listing Principle 2 (failure to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations).
- DTR 3.1.4R(2) (failure to notify the market of share dealings by two PDMRs as soon as possible, and in any event by no later than the end of the business day following the receipt of the information).
- DTR 3.1.5R (failure to include all requisite information in the notification to the market relating to the share dealings by the two PDMRs).
It was found Reckitt Benckiser had failed to detect breaches in a timely manner and in addition had:
- Failed to review its share dealing policy to identify or mitigate certain risks, in particular relating to shares held by third parties on behalf of PDMRs.
- Placed an over-reliance on the knowledge and experience of its PDMRs to comply with the Model Code and to enable it, in turn, to comply with its regulatory obligations under the LRs and Listing Principles.
- Used an informal process for clearance to deal under the Model Code and had not kept adequate records of any such clearance given, in breach of the Model Code.
- Failed to provide regular or structured training or reminders to assist PDMRs in understanding their obligations under the Mode Code (other than in advance of close periods and as part of its annual certification process).
The FCA said that it expects all listed companies to learn the lessons from this case and to ensure they have the right controls and training in place.
Directors’ Remuneration Reporting Guidance
On 18 December 2014, the GC100 and Investor Group published a statement relating to their guidance. The Group has reviewed the guidance in the light of experience over the 2014 AGM season and recent developments. The Group believes it continues to serve its purpose effectively. However, the Group felt that there were several issues that required supplementary guidance and aspects of the original guidance that could be clarified to promote best practice in future reporting. These are addressed in the statement. Points include:
- Assurances given after publication of a remuneration policy as to its implementation should be repeated on the company’s website along-side the items required to be published there and in subsequent remuneration reports
- A revised remuneration policy may be necessary to ensure compliance with the new provisions of the UK Corporate Governance Code to withhold or claw back pay
- It is not necessary to set out the full policy in every report provided but sufficient information should be included to help shareholders easily assess the reported remuneration in the context of relevant aspects of the policy.
- The Remco Chair to explain in their annual statement the link between remuneration and strategy.
- Where discretion to deal with exceptional circumstances is retained, it should be tightly defined and limited to an acceptable maximum.
The Small Business, Enterprise and Employment Bill BIS provisional implementation plan for Parts 7 and 8 of the Bill
On 15 January 2015, BIS published a provisional plan for implementing the company transparency and filing provisions set out in Parts 7 and 8 of the Small Business, Enterprise and Employment Bill. The plan proposes a staged implementation process:
- Two months after Royal Assent: The prohibition on issuing new bearer shares will come into force and the nine month period for companies to convert existing bearer shares will commence.
- October 2015: The prohibition on corporate directors will come into force, together with measures relating to registered office and director disputes, excluding the day of directors' dates of birth from the public register and reducing the time periods applicable to the company strike off procedure.
- January 2016: The requirement for companies to keep a register of persons with significant control will come into force (but the obligation to file this information at Companies House will not take effect until three months later).
- April 2016: The changes to the statement of capital will take effect, along with the new confirmation statement replacing the annual return. The obligation to file information from the PSC register at Companies House will also come into force, and private companies will be able to opt to keep information in their registers on the public register at Companies House.