Enquire, the Investor Relations podcast

Episode 53: FCA and Daniel Holmes - How the FCA balances innovation, speed, and investor protection

• Clara Melia • Season 5 • Episode 53

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UK capital markets are undergoing their biggest regulatory transformation in a decade, and the FCA joins Clara Melia to break down exactly what’s changing, why, and what it means for issuers, sponsors, and IR teams.

Sarah Hone, Daniel Holmes, and James Hunt explain the FCA’s shift toward a more disclosure-based regime designed to improve competitiveness, speed up transactions, and maintain high standards of market integrity. They discuss the new single commercial company listing category, the removal of certain shareholder approval requirements, aggregated short selling disclosures, and the sweeping prospectus reforms arriving in January 2026.

The conversation also tackles day-to-day disclosure challenges, from leaks to late results to complex M&A situations, as well as the regulator’s increasing focus on ESG, greenwashing, and technological change; including the safe use of AI in reporting and capital markets activity.

Packed with practical guidance, real-world examples, and forward-looking insight, this episode is essential listening for anyone shaping or operating within the UK’s listed company ecosystem.

In This Episode:

  • How the FCA monitors live market disclosures and coordinates across UK regulators
  • The four pillars of the 2025–2030 FCA strategy: support growth, fight crime, help consumers, be a smarter regulator
  • New short selling transparency rules and their impact
  • Common disclosure pitfalls and how IR teams can avoid them
  • The new listing regime: simplification, flexibility, and investor-focused disclosure
  • PS25/9: What changes for issuers in the 2026 prospectus regime
  • MAR hot spots: leaks, M&A, guidance misses, CEO transitions
  • ESG disclosures, sustainability labels and greenwashing risks
  • AI in capital markets: benefits, risks and FCA expectations
  • Three practical checks every issuer should prioritise now

Quotes:

  • “Disclosure is the foundation of investor trust, and the new regime puts even greater responsibility on issuers to get it right.”
  • “Inside information must be announced as soon as possible. You cannot offset bad news with hoped-for future good news.”
  • “AI brings huge potential but uploading inside information into open systems is almost certainly an unlawful disclosure.”

Resources:

Connect with Sarah on LinkedIn

Connect with Daniel on LinkedIn

Connect with James on LinkedIn

FCA changes to the UK Short Selling Regime: consultation materials  


Speaker 3:

That's what we call strategic leaks. This is where we see details about live MA deals being leaked to journalists who then put out announcements in the press, et cetera. We believe these are being leaked deliberately to force out details of those deals, and that can be done for a number of reasons. Usually, we believe to put pressure on the directors or shareholders to try and kind of steer the deal in a particular direction. But we've been very clear that this kind of form of behaviour is a form of market abuse, and it ultimately can be damaging to both investors but also overall market integrity.

Speaker 2:

Welcome to Inquire, the Investor Relations podcast. In this podcast, we speak with senior IR professionals on their career experience to share knowledge and learnings around IR strategies. We also speak with portfolio managers and cell phone analysts to explore their view of investor relations and what constitutes best practice.

Speaker 1:

Welcome to the Inquiry Podcast, which today is in conversation with the Financial Conduct of Folity or FCA, the UK's financial regulator. I will start by asking my guests to introduce themselves, explaining their career history and specific role at the FCA. Let's start with Daniel Holmes.

Speaker 4:

Hi there, I'm Daniel Holmes. I'm a technical specialist in the primary market management team, which sits in the market oversight division at the SCA. So my team is responsible for overseeing live kind of share prices of announcements being made by listed companies. So I've been at the SCA for around 10 years, and before that I was at UBS Investment Bank, where I did about 10, 11 years working in UK investment banking.

Speaker:

And Sarah Hone. Hi, I'm Sarah Hone. I am head of primary market oversight here at the FCA. Daniel's team is one of the teams which sits inside my department, and the department more generally focuses on ongoing issuer disclosure and sponsored conduct under the regime such as the listing rules and disclosure guidance and transparency rules and the market abuse regulation. I've been here an embarrassing 13 years now, working in secondary markets for actually most of my career here with experience at UBS and Ice Features before that. And James Hunt.

Speaker 3:

Hello, yeah, I'm James Hunt. I work in our listings department as a technical specialist. We focus on transactions for public companies which require approval from the FCA. So, for example, a new applicant undertaking initial public offer will need the FCA to agree it's eligible for listing and for the FCA to improve its prospectus as well. I've worked in this role for about five years. I really love the exposure to corporate transactions and a little thinking. Prior to the FCA, I spent five years working at a big four in listed company corporate finance. And I started my career in UK equity capital markets at a US investment bank.

Speaker 1:

Let's start by taking a closer look at the FCA's role in the UK market and its strategic direction. So starting with you, Sarah, can you talk to us about what sits inside the primary side of market oversight today?

Speaker:

Sure. We all sit in the primary side of market oversight here. And at a very high level, we work to ensure capital markets operate fairly, transparently, and efficiently. Specifically, we obviously have companies access public markets, we ensure disclosures are being made and are clear, and ultimately that investor confidence is maintained. I thought I'd actually hand over to James in a logical manner to talk about how it works internally.

Speaker 3:

Yeah, so in terms of listings, so the FCA is responsible for new listings, also for approval of prospectuses for those new listings, those companies that want to access UK regulated markets. So we do lots of assessment as to whether issuers meet our listing rules and that they're eligible to list, and also whether their prospectus disclosures are complete, comprehensible, and consistent so we can approve them. We usually work on a transactional basis. So we're working with key counterparts such as sponsors, issuers advisors.

Speaker:

And then after that, that's where Daniel and me and our teams step in as well. So once the companies are listed, we take steps to ensure that companies are complying with their ongoing obligations around disclosure. Specifically, we module markets for leaks of inside information, and the teams will be on the phone to companies and advisors if they think that something does need to be disclosed there. We monitor for potential breaches of disclosure and other rules. We undertake initial inquiries to companies and their advisors where we want a little bit more information. So we're thinking there around misleading statements or where delayed disclosure has been made for inside information, but perhaps inappropriately. And that's triggered by various complaints and referrals that we might receive on that. We also conduct reviews into the rule books that we have at the moment. We undertake reviews into them, but mainly so we can understand market practice around it, consider if guidance is needed, and we also feed into our policy colleagues as well to see if any changes should be made to make our rules more effective and efficient. And finally, we supervise sponsors and primary information providers, quite often referred to as pips in the markets. We sit separately to policy, but we work incredibly closely with policy colleagues and developing primary market policy, trying to adapt to a evolution of markets and our priorities. And we sit separately again to enforcement. However, some of our teams will be potentially using the full toolkit, which includes enforcement referrals, where we think that an impactful deterrent should be used in particular cases. And that's ultimately looking at whether or not we need to uphold market standards and protect investors in the longer term there.

Speaker 1:

And can you tell us more about how the FCA works alongside other regulators, like the takeover panel or the Financial Reporting Council? Also, how you interface with the London Stock Exchange, HM Treasury on primary market issues such as around transactions and disclosure quality.

Speaker:

Absolutely. So we have very close and collaborative working arrangements with our assistant regulators and other organisations. It's necessary to make sure we're joined up. We have longer-term relationships focused on cooperation, allows us to align policy initiatives and things like that. It allows us to look at market-wide issues and emerging trends and challenges. But we also, the teams also work with the different regulators and other authorities on a daily basis, and we really try and coordinate on specific casework so as to not overburden companies and advisors as well. James and Daniel can run into a couple specifics there as well.

Speaker 3:

We've got a really good working relationship with nearly all the regulatory counterparts in the UK that deal with public market matters. I think where an interaction with another regulator would assist us in terms of, say, for example, regulatory functions that we exercise, like is a company eligible for listing, do they have sufficient disclosure and a prospectus? Then clearly we'd look to reach out an appropriate way where we need that input to help us make a decision. For example, we've got, let's say we've got a prospective new applicant for listing and it's admitted to trading on another exchange. Let's say it's the AIM market, London Stock Exchanges Market, we would potentially look to inquire with the regulation team there as to whether or not there have been historically any concerns with the regulatory record. Have they been complying with their rules? We've got avenues that are open to do that for lots of regulatory counterparts, and we really would use that where we think it's appropriate.

Speaker 4:

Yeah, and in terms of my team, and we work very closely with the takeaway panel. So obviously, kind of around MA deals, we are watching share prices and announcements concerning those deals, and we will be in kind of very close contact with the panel. Obviously, the panel has their own set of rules, which companies have to follow, and we also have our rules as well, particularly the market abuse regulation. So we make sure we're joined up in terms of those kind of rules and how they overlap.

Speaker 1:

The FCA recently published its 2025 to 2030 strategy. So, Sarah, perhaps you can talk around the top outcomes that you're targeting for primary markets in this cycle and how you will measure progress against these.

Speaker:

Very much so. So, yes, we have published our 2025 five-year strategy, and there are four strategic themes within that as well, which have been ingrained into every one of us here internally. First of all, to support growth, and this is something we generally tend to do anyway, but it's put it more at the forefront of our minds to fight crime, to help consumers, and to be a smarter regulator. I'm actually going to hand to James to talk a little bit about the supporting growth point before I move on.

Speaker 3:

Yeah, so supporting growth is really a big feature for primary markets and listed companies and those accessing the market. The FCU strategy is focused on doing that by making it easier and more efficient for companies to raise capital. We'd like to encourage more retail investors to participate in the market. We want to keep the UK competitive and attractive for new listings, and therefore it can maintain its pre-eminent position as a financial centre. We've got obviously a few reforms underway at the moment and have had a few reforms recently of primary markets. So what we really want to do going forward is to monitor the number and total market cap of our UK regulated markets. We're going to look at the numbers of IPOs that come to us, the scale of the capital raised on the UK regulated markets to see how those reforms have been effective and to see whether we're doing a good job of supporting growth. We'll also look to see prospectuses, number of further issue prospectuses for secondary capital raisings. I think part of our reforms, which we can come on to, are dealing with basically reducing the burdens on issuers by not having requirements to have so many prospectuses, which hopefully will be a cost saving. And we can look at that to see whether we've got cost savings for issuers, efficient markets, and also importantly, investors able to invest in this journey as part of the whole strategy and supporting growth.

Speaker:

And that for us also links into the fighting crime strategic initiative as well. From our perspective, we recognise that clean markets support economic growth by improving trust, confidence, and participation, which facilitates efficient capital allocation and risk management. And ultimately, that should reduce the cost of capital for firms in the real economy. So we believe that our objective of protecting market integrity supports those trusted markets and long-term economic growth. So we have our metrics that we already actually have on our website, and we have been looking at doing for quite a while. And we are looking at producing more in this space as well, really focusing on fighting crime. Current ones include our market cleanliness metric, normal trading volume metrics, and our potentially anomalous trading ratios. They're all focused on measuring the cleanliness of markets, which we think feeds into supporting growth too.

Speaker 1:

And the FCA recently, as at the end of October 2025, announced that it's consulting on the proposed rules and guidance for short selling activity. So, Sarah, I don't know what you can comment on that at this stage, but it'd be just interesting to hear anything you can say.

Speaker:

Our consultation is open at the moment and it closes on the 16th of December. Please do feedback if you are interested in doing so. Our proposals for public disclosure on now aggregated net short position data were largely determined by the government when it set out a high-level scope and framework earlier this year, and that was following a 2023 review, which was conducted and the government set out a response to it nearer that time. The government explained that it believes the purpose of public disclosure on short selling is to provide investors with information and transparency on how it affects the price of shares. So it considered that the aggregated net short position closures, which even when it anonymizes the short selling entity, would still provide greater transparency on the total net short position, whilst avoiding the potentially distortive impacts of the current regime, for example, where it may discourage short selling activity. And we recognize that short selling activity supports the pricing shares and market liquidity ultimately. One of the changes focuses on instead of disclosing individual net short positions at 0.5% of the issuer's share capital of an issuer as it happens now, we'll be required to aggregate all net short positions above the 0.2%, so a lower percentage. And we would disclose that aggregated position with anonymous entities there. Companies and industries should therefore have greater transparency, sorry, on the extent of short selling activity, even if phenomenalised, and would also be disclosing both current and historic positions at the lower disclosure threshold than now, which is not currently visible under the current regime.

Speaker 1:

And across all the areas you're reviewing and focused on, what's is most in focus right now?

Speaker 4:

Yeah, I might cover something we're looking at at the moment. So that's what we call strategic leaks. This is where we see details about live MA deals being leaked to journalists who then put out announcements in the press, et cetera. So we believe these are being leaked deliberately to force out details of those deals, and that can be done for a number of reasons. Usually you're kind of we believe to put pressure on the directors or shareholders to try and kind of steer the deal in a particular direction. But we've been very clear that this kind of form of behaviour is a form of market abuse, and it ultimately can be damaging to both investors but also kind of overall market integrity. We've been doing lots of stakeholder engagement to try and raise kind of awareness of the issue itself.

Speaker:

And just to add as well, in another area of ours, we've seen a number of accounting issues as well arising amongst issuers. They can include late provisioning, revenue recognition problems, or cultural or weak financial systems and controls. There's a lot of positives going on in this industry as well. We tend to come across the negatives more than that, by virtue of our jobs. But we typically look at these from a misleading statements angle and looking at whether or not harm may have occurred to investors through inaccurate reporting and financial information.

Speaker 3:

And for me, I think we're seeing a fair bit of interest in crypto and obviously those crypto businesses that would like listings. The possibility of retail investors accessing crypto exchange traded notes has been opened up recently. So we've obviously seen and dealt with several listings for those products over the past couple of months. There's also been lots of interactions with equity issuers. They have various exposures to crypto as part of the business models. It's been really interesting actually getting up to speed on crypto, understanding the technology, the risks, and obviously how that fits into disclosures, particularly those that go into a prospectus and how that gets explained to investors.

Speaker 1:

Just on the leaks point, I think, as the former in-house IL professional, that's music to my ears. Because there's nothing better when you're working in-house than a 10pm leak into the press on your deal. So, and Daniel, just where are issues most likely to trip up in day-to-day disclosure and record keeping?

Speaker 4:

Two points to cover there. So, first is around obviously the company needs to be looking at when information might constitute inside information and also when it might not. So it's very important that companies are on top of that, keeping a record of that decision and the reasons why. And then also the importance of publishing audited financial statements on time. We see those statements as kind of being key pieces of disclosure for a listed company. So we place a big degree of emphasis on those audited accounts going out. And we also have our approach if a company isn't able to meet the deadline to put those accounts out, then typically we would suspend the listing, which stops the trading in the shares until the accounts can then be published at a later date.

Speaker 1:

And I'll just add to that from my own experience as an advisor to listed companies is the importance of IR being aware of the need to keep good records, particularly when it is an unscheduled announcement, having a clear timeline of events and not just relying on your COSEC team to sort of record that information. It's something I think the IR audience listening to this podcast should be mindful of. So now on to making the UK market more competitive and the listings reform. So, James, perhaps you can comment on the FCA's primary markets effectiveness review in more detail, which is aimed at making London a more attractive listing venue. So talk to us about what's tangibly changed for issuers and sponsors.

Speaker 3:

Yeah, just to go over primary markets effectiveness for those who might not have heard that term before. So it's really an ongoing initiative by the FCA to ensure that our primary markets connect companies with investors and support economic growth. What we're trying to do is make the market more efficient, competitive, give access to a broader universe of not only issuers but also investors as well, different types of investors. We want obviously companies to list here and we want to improve investor decision making on those types of companies that they want to invest into as well. So, in terms of the listing regime, we're trying to make it simpler. The most recent changes came into effect last year in 2024 in July. We've also got, as part of our wider regime change, prospectus rule changes coming as well in 2026. In terms of what's changed tangibly for issuers, so the most recent material changes from UK listing rules have really, as I said before, we tried to make it easier for companies to list in the UK, compete, and also grow as well. What we've done at a high level is we've shifted the framework to a more disclosure-based approach. We're trying to put information into the hands of investors so that they can make informed decisions. What that has meant is that we've been able to remove some of the barriers that listed companies had in place in terms of accessing things that they doing what they wanted to do. So there is no longer a requirement to obtain shelter approval for really big significant transactions around MA or related party transactions for commercial companies. We've provided more flexibility on what voting structures can list. We've created a single simpler equity listing category for commercial companies. And all those things we think will help to broaden types of businesses that seek participation in our markets. I think what we would say is that disclosure is going to be really key for issuers and their advisors to be focused on. It's about going to be getting what's relevant information out to investors and focus on the really key core disclosures that align with those that are in the listing rules. We know that that hopefully is really helping issuers get on the right foot on those types of transactions. I think what broadly speaking, the changes to the regime also mean in terms of what sponsor work that's done is that it's going to be more transactional in terms of really focusing on new applicants that come to us for listing. As part of the prospectus rule changes, we're probably expecting to see fewer further issue prospectuses that sponsors are going to get involved in.

Speaker 1:

Can you tell us more about the practical impacts of policy statement PS259, which are the new rules for public offers and admissions to trading regime that come into effect in January 2026? So, what should issuers or sponsors be doing differently?

Speaker 3:

PS259, what this really is, is that is our new prospectus regime that comes into force on the 19th of January 2026. Big change in many ways because we're getting a new regime that the FCA has more direct oversight of. However, in terms of disclosures, it's not necessarily lots to change. What the regime does is it uh brings back into kind of the FCA's remit what disclosures and how we can work the regime. I think the really big picture points which I want to mention in terms of how they might impact issuers are so firstly, listed companies that already have a listing, the threshold for needing to have a prospectus when issuing new shares is changing. So previously it was 20% of your issued share capital. If you're issuing that, you have to have a prospectus. That's increasing to 75%. Second point is that there is no longer a public offer trigger for prospectus. The other point as well is that we're reducing the period of time that IPO prospectus' offers to the public need to be made available. It's reducing to three days. That hopefully should encourage issuers to include public offers and retail investor access as part of their new listings on markets. And then I think for debt issuers, again, there's a big change there in that there's no longer a distinction in the regime between retail and wholesale. That has the effect of meaning that hopefully debt issuers will issue bonds in lower denominations, which should benefit real retail participation. I'd just like to point out two new potential disclosure areas for issuers and their advisors. So the new prospectus regime introduces disclosures around climate-related risks and opportunities, where those are material to an issuer. And then also there's the ability to include what we're calling protected forward-looking statements. We're reducing the stringent liability threshold that attaches to a prospectus on those particular items. We've been really busy updating all of our technical notes. There's new guidance around complex financial histories where issuers have undertaken lots of acquisitions in their recent past. And we've also got some new guidance on working capital disclosures. The new notes are going to be available in the new year. You can have a search now on our FCA knowledge base. I'd like to say we've had a couple of new IPOs obviously in the past couple of months. For example, Shawbrook and Princess Group included retail offers in their offers. Issuers have really valued, I've discussed before the point that when making significant transactions, issuers no longer have to get FCA pre-approval of a disclosure in a circular, and they don't have to get shared approval. That's been really great for them being able to compete against private companies. We've also seen some really interesting secondary listings that have happened this year. So we've had a US business that's a startup that's looking to build power for data center campuses that's hopefully drawn into London's earlier as a pre-eminent financial centre as well. And I think we've also had a couple of at least one issuer that wouldn't have been able to list under the old listing rule regime as a startup. Say previously we had a track record requirement that you needed three years of history. It was an issuer to list. Now we don't.

Speaker 1:

And how does the FCA view the balance between protecting investors while enabling innovation and speed of execution?

Speaker 3:

What we're really kind of enacting the primary reforms over the last few years is trying to balance, basically tracking that broad range of companies to list and grow, but also maintaining our high standards. So, yes, our reforms have obviously moved the balance back in favour of disclosure and they've taken out some of the rules. But I think we have really wanted to do premise, you know, our changes on the need for innovation so UK markets can operate efficiently and competitively. In our rules, we've sought to facilitate that, but giving the investors the information that they need by asking for the rules to do that.

Speaker 1:

And Sarah, what behaviours from issuers and sponsors most help London compete globally without compromising standards?

Speaker:

Sure. So recognising that we want investors to be able to make their own investment decisions which work for them and fit their own risk appetites, we're deliberately moving more and more towards a disclosure-based regime and our policy reforms support this. To keep investment up though, it's in all of our interests to ensure that we are just that, i.e., transparent and timing disclosures are made to the market. From a sponsor perspective, we have an incredibly strong group of corporate finance experts in the form of sponsors for our companies to use. We've kept the requirement for a sponsor to those situations where we most value their expertise and assurance. But we do recognize that this imposes costs more generally. We've tried to make sure the rules and guidance, i.e. not custom or historic practice, but the rules and guidance align with our expectations in this field. But to help with this, what we would ask for sponsors is to guide issuers through our important processes and apply good, solid judgment around the necessary due diligence in each scenario. This should keep the overall process efficient and effective and hopefully help to keep costs down where appropriate. So companies should really be using their sponsors and other advisors as they see appropriate.

Speaker 1:

Next, let's talk a little bit around market abuse regulation on MA and inside information. So, Daniel, this is your area. Perhaps we can just start by talking about what constitutes market abuse and where do you currently see the highest risk patterns? Obviously, you've talked a little around leaks of inside information already.

Speaker 4:

Yeah, so in terms of market abuse, there's three main forms of market abuse. First, there's unlawful disclosure of inside information. So that's where you're disclosing inside information to someone else where that disclosure is not made in the normal exercise and employment professional duties. Then we've got inside of dealing, that's where you're dealing when in possession of inside information. And in MAR, there's a wide definition of what dealing kind of actually constitutes. And then we've also had market manipulation. So again, in MAR, there's quite a wide definition that is really around buying and selling instruments to give disleading signals or disseminating information in the media, which gives false or misleading impressions. So those are the three main forms of market abuse. MAR hinges very largely kind of around internal information, and MA itself defines information and there's four limbs to this. So first of all, internal information has to be information which is precise, which is non-public, which relates directly or indirectly to issuers or financial statements. And then also if the information was made public, it would have likely to have a significant effect on the prices of those financial instruments. In terms of where we see the greatest risk of harm at the moment, so really three main areas we're kind of particularly focused on. So firstly, um the scale of organized criminal groups. As I've mentioned before, we're very focused also on deliberate leaking of inside information to journalists who then publish that information in kind of press articles. And then also we're kind of focused as well from the issue side. So we're where the issuers are approached by various organizations, individuals, and that maybe to offer them kind of particular capital market expertise, particularly around fundraising. We're aware some of those kind of individuals or companies are probably doing that for nefarious kind of motives.

Speaker 1:

Can you give some examples, rate areas of interpretation around inside information where issuers, PLCs might struggle to determine whether it is or is not inside information?

Speaker 4:

Yeah, so actually last year we published in one of our primary bulletins, we published an article around this, and actually this look at three areas which we commonly come across where we know issuers sometimes struggle around what constitutes inside information. So the first issue is around when a company's in a takeover process. Takeover interest is probably likely to be inside information at quite an early stage. And in our view, before a board agrees to a kind of a takeover, when it becomes inside information will depend on the situation itself. So the things that might affect that would be the identity of the bidder, the nature of the offer, kind of how much the offer is, and also the likelihood that the board will accept it. So when a company is considering when it's something might be inside information, it should think very carefully at what stage it triggers that. The company will also need to look out very carefully for leaks of that inside information. So that might be leaks in the press, but it might also be kind of leaks around shareholders. If there is a credible leak, then the company will need to then announce that inside information to announce details of the deal to the market. So the next area is around where companies are preparing half-year or annual results. As that stage progresses up to the scheduled announcement, a company will need to assess whether any aspects of those results might actually be inside information and might require to be published earlier than the scheduled results announcement. And this will be particularly relevant when a company has published financial objectives or targets. An internal forecast suggests that those kind of objectives or targets might not be met. The last situation we called out was around resignations and appointments of CEOs. So we often see press speculation around when CEOs might be departing. In that situation, it's important for a company to get how the market abuse regulation applies. So to assess internally the departure of the CEO and the appointment of the new CEO to look at whether each of those two situations might constitute inside information.

Speaker 1:

And what would alert the FCA to a potential break that might trigger an investigation?

Speaker 4:

Yes, we look at a number of different factors. We will look at share price reactions to company announcements or events. We will receive shareholder complaints, which we'll look into. We'll have intelligence both from within and outside of the FCA. We also receive uh whistleblowing reports from individuals. And we also undertake and might in particular undertakes real-time monitoring of share prices and press and announcements. Where we see an untoward movement in a share price, then we might contact an issuer or an advisor to understand if the issuer is in possession of inside information and may need to publish that inside information.

Speaker 1:

And can you walk us through a recent example that illustrates where things went wrong, either a leak or a misuse of inside information?

Speaker 4:

A good example, I think, for particularly for this audience would be there was a company in the process of preparing for their scheduled results announcement. But prior to that, there was a finance pack that was circulated amongst executives. And that finance pack showed that the revenues for the period did not meet the company's original internal forecasts and also the external consensus that analysts had published. So, in that situation, the issuer decided not to disclose this divergence of performance, but wanted to kind of wait until they get their scheduled results announcement. And one of the reasons for that also was because the issuer thought that even though there was poor performance at the moment, then that would be compensated at a later date by some over outperformance. When the issuer kind of then subsequently kind of published it at their results, the share price dropped over 40%. So in that situation, our expectation would have been that the issuers should have announced that divergence of that poor performance earlier. We have specific guidance to issues that they cannot offset bad news with good news.

Speaker 1:

And inside information defined under UK MAR and in accordance with the disclosure and transparency rules must be announced as soon as possible. So when the FCA investigates the timing of an announcement, what information would you typically first request from an issuer and then what subsequent or more detailed requests might follow on from that?

Speaker 4:

So we'll undertake some preliminary inquiries to begin with, and that's really just gathering information, so getting a better picture of what the kind of circumstances were, and that will really kind of help us then to assess whether we need to kind of ask for some more information. Typical kind of things we request would be a chronology of events leading up to the circumstance, the incident. And we might also ask for inside lists, which an issuer would be kind of required to keep if the information was inside information. And then we're probably asking some more specific questions around that particular incident. We often ask what advice the issuer sought from their advisors as well.

Speaker 1:

And how would you contact a company? Is it made directly into the company or is it made via the company's regulated sponsor or regulated advisor?

Speaker 4:

We'd usually send that directly to the company, although we understand the company might then seek assistance of their advisors to respond to our requests, and that's absolutely fine. If our interest relates to kind of a sponsor's performance, then we would interact directly with the sponsor. But in most circumstances, it will be directly with the kind of the listed company.

Speaker 1:

And do the same rules and expectations apply to listed debt as well as equity issuers?

Speaker 4:

In theory, uh UK market abuse regulation doesn't distinguish between equity and debt instruments. But in practice, there's likely to be differences about how it impacts decisions and particularly around whether information might be inside information or not. So for example, you know, and this is kind of Very much generally speaking, information is more likely to be inside information if it relates to kind of equity rather than debt, although that's not always the case. So, for example, if an issuer is in financial difficulty, but as I said, it's really important to look at it on a case-by-case basis. And actually, this is a kind of example of a type of area where we might conduct thematic reviews to kind of understand how issuers think about that and how they then comply with the rules.

Speaker 1:

And in terms of our audience thinking about how to work with the FCA, so Daniel, just first with you, we've sort of touched on interaction with a regulated advisor already. When should a company or individual contact the FCA directly rather than through a regulated advisor?

Speaker 4:

If an issuer wants to discuss their disclosure obligations for a particular reason, they can contact us. And also my team itself, we we deal with suspensions of listings. So again, there'll be different situations where an issuer might want to request a suspension so they could contact us directly regarding that.

Speaker 1:

And Sarah, what are your internal touch points within a company? Do you interact directly with the board, non-executive directors, company secretary, legal, andor investor relations?

Speaker:

But where we're looking at potential instances where we need a bit more information on, let's say, in the ceiling statements or delayed disclosure, we will probably direct our information requests directly to senior management, whether it's CEO or CFO for smaller companies. And for the larger companies, we might already have established lines of communication to the heads of compliance or general counsel or company secretary. Some instances we might go to the company's broke or nomad if it's convenient. We have those details and they've contacted us. Some of our new rules last year brought into focus a rule around just contact details. It's very difficult when we do need to get in contact with companies, particularly on the live markets front, if we do see leaks of information and we need to speak to the company as soon as possible to make sure they're aware of it. And we really do need those contact details up to date. Lovely form on the website, nice and easy for companies to do. Please do have a look if you haven't already.

Speaker 1:

And obviously make sure the team is actually checking the inbox for that response form as well. Do you have any advice on how I our professionals who are not regulated can educate themselves on MAR, the disclosure and transparency rules and their practical applications for our profession?

Speaker:

Yeah, so we're obviously trying to do a little bit more like this ourselves, recognising that it can be useful. So do watch out for things like this. Daniel mentioned our primary market bulletin. I think we're at number 59 as of the date that we speak today. This is our newsletter, which is available on our website, easy Google FCA PMB or Primary Market Bulletin. This is uh sister publication to one that we have in secondary markets as well, called Market Watch, which will also probably have some interesting and useful information for IROs.

Speaker 1:

And I'll just add to that, from my perspective, the IR society in the UK, for example, does some great training courses and the certificate investor relations, which covers the essential regulation you need to know from an IR perspective. And just briefly as we start to wrap up the conversation, I'm just keen to touch on the broader regulatory landscape as well as technological change in capital markets. So just first around ESG has been a greater consideration for investors in recent years. So how is the FCA approaching ESG disclosures and greenwashing risk? And perhaps, James, you start with that question.

Speaker 3:

Yeah, so I think there's really good recognition that if we've got high quality disclosures from listed companies on climate-related risks, opportunities, that that's going to be really effective in terms of allocation of capital. And therefore, maybe that impacts the broader objective of net zero and a great economy as well. In particular, with the new prospectus regime, we're approaching it by having mandated specific disclosures for commercial equity issuers that either have got material risk factors that relate to climate or else they've got material opportunities that affect their prospects because they relate to climate as well. So that's going to be an extra focus in the prospectus regime. We've also got in the prospectus regime a little bit more transparency for debt instruments. So some debt instruments are labelled as sustainability debt instruments, and we want to make sure that it's very clear that where they're marketed as such, that the issuers provide supporting information that investors will find useful. More broadly, I think the FCA have we've got recently put out our sustainability and disclosure rules, which broadly affect authorised firms. So I'm not just talking about listed companies there. They do have a wash through and affect listed funds, but those rules effectively include an anti-greenwashing rule.

Speaker:

If I could just pick up on the greenwashing respective as well. So we appreciate that many of the disclosure requirements are new and evolving, and companies are probably getting to grips with some of them, but at the same time, we also know that these disclosures really matter to certain investors, and this type of disclosure can therefore lead to a risk of greenwashing, which in our language can be market abuse. So we are tapping this from two directions as well. We want to support companies in their efforts to comply. Some of our thematic work will look at that to focus on the understanding of some of the rules, adherence, and also the challenges that companies are facing with it, recognising that it is new. But we also have been expanding our detection of potential market abuse, considering greenwashing behaviours as well, so that we might consider sustainability disclosures that mean late or misleading as well.

Speaker 1:

And how is the FCA preparing for technological change, including the use of AI, both by market participants and the regulator? And what are the risks that you're most concerned about?

Speaker:

So we definitely want to enable safe and responsible use of AI. We realise the potential benefits for markets and investors whilst balancing the risks of it. On the side of investors, we know that investors might be using AI for help, both in understanding regulatory and financial services jargon, perhaps, but also for making investment decisions. We really recommend that investors do consider using multiple perspectives when making financial decisions. I know there's some information on our website, and we're also looking to try to give more on that. We're also aware that AI is being used throughout the capital markets raising process as well, around investor intelligence, deal sourcing, market research and valuation, investor relations and marketing, and also on the compliance side, of course. Our regulatory approach is principles-based and outcomes focused, and we believe that with a fast-moving technology like AI, this is genuinely the best way to support UK growth and competitiveness. But with that, obviously, come some specific risks. But we are aware of some specific examples being used as well. Daniel, do you want to cover one of them?

Speaker 4:

Yeah, we're aware that obviously AI will be very helpful in terms of the company kind of preparing for how they communicate the results. So we've seen some examples. One we saw was where the CEO delivered the company presentation using an AI avatar. So lots of kind of very interesting ways of doing that.

Speaker 3:

But as far as we've seen for prospectuses, we're aware that in the US there's a move to channel AI into producing prospectuses and also in the verification process as well. I think we can see why that is going to happen and probably will, I suppose, become a feature of UK markets at some point. As you probably would expect, we really want to see safe, responsible adoption of AI in financial markets. So I think you know, clearly, if issuers, their advisors are going to use AI in any part of prospectus, the listing process, I think it's really key that they have a defined process which gives accountability to someone for the outputs, and especially given the liability regime that attaches to prospectus as well.

Speaker:

We're also trying to do some research and outreach to understand the regtech landscape more generally in the primary market space, understand what's being used, particularly in the small medium company space, where we think that there's probably some solutions out there to really help companies with the regulatory landscape.

Speaker 1:

And is the FCA itself using AI at all?

Speaker:

It is. I mean, AI is not just changing markets, but it's also changing the way we regulate. We're on an AI journey. I mean, one of our key strategic priorities was to become a smarter regulator. So it would be foolish to avoid data and AI with that. I think the UK has still got a large environment capital market, and our internal resourcing is always going to be a challenge. Within our space, we're looking to become more efficient but also more effective in our work. We know that there are advanced models at the moment that can identify fraud and bad actors. So we already use web scraping and social media tools across the building to detect, review, and triage potential scan websites. And we plan to invest more in these types of technologies to proactively monitor markets. We've also just rolled out Copilot across the entire organisation after a very successful trial. But we are trying to undertake proofs of concepts and introduce these types of technology very gradually and safely.

Speaker 1:

And I don't know if you can answer this, Daniel, but is there any guidance around uploading inside information into open source AI like ChatGPT or Copilot?

Speaker 4:

Yeah, I would say be very careful, very careful about doing so. So yeah, I mean the key risk there would be other people can access it. And that would probably almost certainly be kind of unlawful disclosures.

Speaker 1:

And final question, I'm going to ask you to answer the same question. So if you can suggest three things for companies to check, what would they be? Daniel, perhaps you go first.

Speaker 4:

Make sure that you know, within the company, people are clear who's responsible for identifying potential information and what that process is. And also be wary of unsolicited approaches that you the company might receive from individuals or firms, you know, offering to engage with them around their listing or capital structure. Do some due diligence on those on those kind of people or firms before engaging more fully.

Speaker:

And Sarah? Yeah, so my three points were as situations develop internally, we do have a plea for companies to keep an eye on when it might become material to investors, i.e., it does hit that inside information definition of being precise. Second one would be to take proper advice if you're thinking of delaying disclosure of inside information and to very much use your advisors in those instances if you believe appropriate. And our third one was just a flag that attempted to use media to disclose significant information strategically in any say gave or acquisition could be considered market abuse. We're genuinely interested in how our rules impact your work and whether there are things that could be done to ease the process of shareholder engagement whilst also meeting the spirit of MA, sorry, the market abuse regulation. So if you do have any feedback, please don't hesitate to engage with us on that.

Speaker 3:

For me, I'd really encourage issuers to familiarise themselves with the key changes for the new prospectus regime. A really good starting place for that is policy statement 25-9. Issuers should also be asking themselves the question: can they open access to retail investors and broader, broader suite of investors when they're offering their shares in the future, given the changes are broadly designed to facilitate that? And I'd also get them to think about and check requirements and whether or not they can think of putting in forward-looking information in the form of protected forward-looking statements in prospectuses to try and help quality of information for investors.

Speaker 1:

Well, thank you all very much for your time, your insights, and for joining me today.

Speaker 2:

And thank you for joining Inquire, the Investor Relations podcast. Please look out for our next episode.