EQ Monthly Bulletin - March 2023

Financial Conduct Authority – Primary Market Bulletin No.43

The Financial Conduct Authority (FCA) has published Primary Market Bulletin 43.

Read More: Primary Market Bulletin 43 .

The Bulletin focuses on the following matters:

Multi-factor authentication ensures that only users can access their account(s). Users must enter a one-time passcode each time they log into: Connect, Reg Data, Online Invoicing (Fees Portal) and Shared Intelligence Service (SIS) – from 20 February. Electronic Submission System (ESS) – from March 2023. The user will be prompted to turn on multi-factor authentication when attempting to log in (expected from March 2023 for ESS). They will need to authenticate by entering a one-time passcode. A user’s code will be generated from either: 

• An authenticator app. 
• A text message.      
• An automated phone call. 

Financial Reporting - Equivalence of non-UK regimes: Under DTR 4, issuers must prepare annual and half-year reports, which are prepared in accordance with UK-adopted IFRS. However, under DTR 4.4.8R, the FCA can grant an exemption for reports prepared under the law of a third country where that is considered "equivalent". The FCA has confirmed that it deems Generally Accepted Accounting Principles of the People's Republic of China (Chinese GAAP) equivalent.

The Quoted Companies Alliance: The QCA Corporate Governance Code – 10 years on

The Quoted Companies Alliance (QCA) has issued a report to mark the 10^th anniversary of the QCA Corporate Governance Report.

Read More: The QCA Corporate Governance Code - 10 years on

The current version of the QCA Corporate Governance Code was last updated in 2018 and is likely to be updated this year. 

In addition, the report also includes the results of a survey carried out on fifty annual reports, accounts, and corporate websites of a range of small and mid-sized quoted companies with securities admitted to AIM across all sectors. The report considers those areas where disclosures have improved under the principles of the QCA Corporate Governance Code between 2018/19 and 2021/22.

While there has been a general improvement in disclosures, certain areas have been highlighted, including, amongst others:

Principle 2 – Seek to understand and meet shareholder needs and expectations – There has been a noticeable increase in companies disclosing information about how they engage with shareholders, describing how successful these interactions have been.

Principle 6 – Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities – Companies have been providing better descriptions of the relevant knowledge, skills and personal qualities and abilities that each director brings to the board and how this helps to deliver the strategy of the company for the benefit of shareholders over the medium to long-term.

Principle 7 – Evaluate board performance based on clear and relevant objectives, seeking continuous improvement – Overall, there has been a significant improvement in the number of disclosures around board performance and board performance evaluations. Typically, companies provide more information about how an assessment has taken place and the results and recommendations of it.

However, there have been areas which have seen a drop in disclosures, such as the time commitment required from directors (including non-executive directors as well as part-time executive directors). This has fallen from 80% to 38%. The explanation of how each director keeps their skillset up-to-date has seen a reduction from 32% to 14%.

FTSE Women Leaders Review Report

The FTSE Women Leaders Review has published a report on gender balance in the FTSE350 and the top 50 largest private companies (six of the private companies did not submit responses).

The review based on information as of 11 January 2023 is now available.

Read More: FTSE Women Leaders

The review found the following:

• Women held 40.5% of FTSE 100 board positions (up from 39.1% in 2021), but 7 FTSE 100 companies had not yet achieved the 33% target. 43 boards had not met the current 40% target.
• Women held 40.1% of FTSE 250 board positions (up from 36.8%), but 24 FTSE 250 companies had not yet achieved the 33% target. 10 companies previously had 33% but had since fallen below that number. 113 companies had not met the current 40% target.
• Across the FTSE 350 there were only 55 women chairs (19 in the FTSE 100), 130 women Senior Independent Directors (37 in the FTSE 100) and 21 women Chief Executive Officers (9 in the FTSE 100). There were only 79 women executive directors (34 in the FTSE 100), being 13.8% of executive directors in the FTSE 350.
• The FTSE 350 had no all-male boards, and there was only one company with only one woman on the board.

The report makes the following recommendations:

• The voluntary target for FTSE 350 Boards, and for FTSE 350 Leadership teams is increased to a minimum of 40% women’s representation, by the end of 2025. To maintain gender balance over time, and provide a degree of flexibility, companies should aim to maintain the representation of both men and of women at, or above a minimum 40% threshold.
• FTSE 350 companies should have at least one woman in the Chair or Senior Independent Director role on the Board, and/or one woman in the Chief Executive Officer or Finance Director role in the company by the end of 2025. All companies should increase their efforts to understand and remove bias from the selection process on Board and Leadership appointments.
• Key stakeholders, such as the Investment community and corporate governance agencies should continue to set best-practice guidance. Or have in place alternative mechanisms to encourage any FTSE 350 board that has not yet achieved the 33% target for 2020, to do so. In addition, FTSE 350 Boards below 33% women, should look to the under-represented gender when considering additional appointments.
• The scope is extended beyond FTSE 350 companies to include the largest 50 private companies in the UK by sales. This will provide consistency of regulatory approach and drive further progress across British business.