Sponsors are firms we approve to advise premium listed companies on their obligations under the listing regime and to provide important assurances to us regarding certain transactions.
The Financial Services and Markets Act 2000 (FSMA), as amended, enables us to make rules that require an issuer to appoint a sponsor in certain circumstances. Issuers are responsible for complying with the FSMA Part 6 Rules, but sponsors give them specific expertise on how the Listing Rules, the Disclosure Rules and the Transparency Rules apply, using their experience of previous issues. They also help us meet our regulatory obligations by confirming that issuers have complied with the Listing Rules.
Often the sponsor will already be involved in a transaction in another role, for example as financial adviser or underwriter. Sponsors therefore identify and manage conflicts of interest so they can carry out their role objectively. We monitor sponsors in this regard. Sponsors also oversee the due diligence process and provide an effective challenge to the issuer's forecasts and statements. An issuer need not appoint a sponsor at all times, but an ongoing relationship between them puts the sponsor in a good position to ensure the issuer complies with the Listing Rules.
Types of sponsor firm
The list of sponsors includes a range of sponsor firms. The majority are FSMA-authorised, from large investment banks to smaller corporate finance houses. A few are accounting and legal firms.
When a sponsor must be appointed
An issuer need not use a sponsor for all transactions, but must use one for major transactions such as an initial public offering or a Class 1 transaction where an issuer acquires or disposes of significant assets outside the ordinary course of business.
Issuers may also have to appoint sponsors to give us specific assurances, such as information on a new applicant’s eligibility or a fair and reasonable opinion on a small related-party transaction. If an issuer breaches or may have breached the Listing Rules or Disclosure Rules, we may also require it to appoint a sponsor.
Issuers must also seek a sponsor's assistance if they are proposing to enter into a transaction that could, due to its size or nature, amount to a Class 1 transaction or a reverse takeover. An issuer contemplating a reverse takeover must appoint a sponsor to discuss its listing with us. Similarly, if an issuer is proposing to enter into a transaction that is or may be with a related party, it must seek a sponsor's assistance. See LR8.2 for rules on when a sponsor must be appointed.
Chapter 8 of the Listing Rules, and the sponsor principles
The rules governing sponsor firms and their conduct of sponsor services are set out in Chapter 8 of the Listing Rules. Among them are the principles for sponsors (LR8.3.3 to 8.3.14). These set standards that sponsor firms must meet whenever they perform a sponsor service.