Overview
The FCA’s Disclosure Guidance and Transparency Rules (DTR) (link to FCA Handbook) implement various European Directives into UK law. These remain in place after the UK’s exit from the EU, either as EU-derived domestic law or as direct retained EU law:
- the Transparency Obligations Directive, which sets out the rules for ongoing disclosure which cover periodic financial reporting and notification of interests in shares. In the UK these have been implemented in chapters 4-6 of the FCA’s Disclosure Guidance and Transparency Rules (link to FCA Handbook);
- the Market Abuse Regulation (MAR), which sets out rules to prevent market abuse including rules around the disclosure and control of inside information and disclosure of dealings in shares by directors and other senior management of issuers. In the UK these have been implemented in chapters 2-3 of the FCA’sDisclosure Guidance and Transparency Rules (link to FCA Handbook); and
- the aspects of the Accounting Directives relating to corporate governance; and
- the requirement in the Statutory Audit Directive for listed companies to have an audit committee.
Financial reporting requirements
The financial reporting requirements are set out in DTR 4 (link to FCA Handbook).
| Topic | Rule | Summary of requirements |
|---|---|---|
| Annual financial reports | DTR 4.1 |
|
| Half-yearly financial reports | DTR 4.2 |
|
Disclosure and control of inside information
DTR 2 (link to FCA Handbook) sets out requirements relating to the publication of ‘inside information’ – information which:
- is not generally available,
- relates, directly or indirectly, to one or more issuers of the qualifying investments or to one or more of the qualifying investments, and
- would, if generally available, be likely to have a significant effect on the price of the qualifying investments or on the price of related investments.
This would include announcements typically referred to as “profit warnings”
Issuers are required to disclose inside information to the market as soon as possible, except when to do so would not mislead the public and would prejudice the issuer’s legitimate interests. Such interests might include negotiating an acquisition or disposal. However, issuers must then put in place controls to ensure that third parties that do become ‘inside’ (e.g. advisers and other parties to a deal) keep the material confidential, and that when the matter is no longer prejudicial (or if it leaks) that an announcement is made forthwith.
Disclosure of dealing by persons discharging managerial responsibilities and notification of acquisition or disposal of major shareholdings
The DTR also contain two sets of rules containing disclosure of ‘influential’ shareholdings to the market:
- DTR 3 (link to FCA Handbook) applies to issuers of debt and equity securities deals with disclosures by persons discharging managerial responsibility – directors and other senior executives with access to information and the power to make decisions affecting the issuer’s future development and business prospects - and their connected persons.
- DTR 5 (link to FCA handbook) applies to issuers of shares and depositary receipts representing shares and deals with disclosures of the acquisition and disclosure of major shareholdings in entities with shares admitted to trading on a UK regulated market. In order to determine whether a holding is major, issuers must make a monthly announcement of the number of shares in issue. DTR 5 is the only part of the DTR that applies to AIM companies.
Listing Rule 9.8 (link to FCA handbook) requires disclosure of a summary of this information in the annual report of a company with a premium listing of shares.
Corporate governance and audit committees
Companies with a premium listing have for many years been required to make corporate governance disclosures on a “comply or explain” basis against the UK Corporate Governance Code, including the provisions relating to audit committees.
The DTR contain what have sometimes been described as “comply or else” rules:
- DTR 7.1 (link to FCA handbook) requires almost all issuers (whether of equity, debt or depositary receipts) to have an audit committee. The only exemptions are for subsidiaries of*ck-incorporated companies that are themselves subject to the same audit committee requirement, issuers of asset-backed securities that make a statement as to why they believe they don’t need an audit committee and small credit institutions which have only listed debt with a nominal value of <€100m that have never published a prospectus.
- DTR 7.2 (link to FCA handbook) requires UK incorporated companies with listed shares (or with shares traded on AIM and listed debt) to publish certain corporate governance information. Compliance with the UK Corporate Governance Code should satisfy this requirement. The Financial Conduct Authority (FCA) also requiresissuers to disclose their diversity policy in the corporate governance statement. In April 2022 the FCA amendedDTR 7.2.8AR to improve diversity disclosures by in scope companies.
Publication of regulatory information
DTR 6.3 (link to FCA handbook) is concerned with the dissemination of information. It requires other periodic financial reports to be communicated in unedited full text. With effect from 10 January 2022, DTR 6.3.5R allows companies a choice between:
- communicating the regulated information in unedited full text; and
- announcing that the unedited full text has been published to the National Storage Mechanism and communicated to the media, containing a statement that the regulated information is available in unedited full text on the National Storage Mechanism and giving details of the website on which the full annual report is available.
