Primary Market Bulletin 46

The FCA has published Primary Market Bulletin 46 (PMB 46), which contains guidance for market participants on two areas: shareholder co-operation in the context of ESG stewardship, and sponsor procedures in relation to listed companies’ disclosure requirements in line with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Shareholder co-operation

Under Article 10 of the UK Market Abuse Regulation (UK MAR), it is an offence to unlawfully disclose inside information. The FCA says that, in the wake of the Gent enforcement decision in August 2022 (where Sir Christopher Gent was fined for unlawfully disclosing inside information to two shareholders of a company which he chaired – see our briefing for further details), it received a number of queries about Article 10 and how it applies in specific circumstances. The guidance in PMB 46 focuses in particular on shareholder co-operation regarding ESG stewardship.

The FCA says that two earlier resources on shareholder engagement – a letter it sent to the ABI in August 2009 and Market Watch 20 published by the FSA in May 2007 – are still relevant when considering issues of shareholder engagement, co-operation and activism, notwithstanding the changes in law that have occurred since their publication. The FCA also confirms that the Gent decision has not changed the FCA’s approach to the market abuse regime and that the decision should not prevent engagement between companies and their shareholders.

On strategy and voting intentions, the FCA notes there may be merit in institutional investors making public their ESG stewardship plans to reduce the chance that these plans are viewed as containing inside information and to simplify collective action between shareholders in relation to ESG issues.

TCFD-aligned disclosures and sponsor procedures

Under the Listing Rules, premium and standard listed companies must include climate-related financial disclosures in their annual reports (see our briefing for further details). The FCA has carried out a review of sponsors to assess how they have changed their procedures to ensure that applicants for listing have in place the necessary systems to comply with their TCFD-aligned disclosure obligations on an on-going basis.

The review found that most sponsors had amended their internal policies to reflect that climate-related matters are under increased scrutiny. The FCA also observed that most sponsors used internal expertise when assessing their procedures in this area. The FCA does not expect sponsors to be experts in TCFD-aligned or climate-related reporting but does expect sponsors to have sufficient skills, knowledge and expertise to be able to interpret and apply relevant elements of the FCA Handbook in the specific context of a listed issuer’s business and operations. The FCA also reminds sponsors of the need to ensure that staff involved in sponsor services are provided with appropriate training, including with regard to climate and sustainability reporting developments.