Our supervision of sponsors is distinct from our supervision of authorised firms. We focus on ensuring sponsors fulfil their responsibilities under the listing regime.
The importance of supervising sponsors
Sponsors have an essential role to play in assisting us to meet our objectives of maintaining the integrity of the market and ensuring an appropriate degree of consumer protection. We hold sponsor firms to high standards because a failure by a sponsor could harm both market integrity and the interests of consumers.
Sponsors are required to comply with our approval criteria on an ongoing basis and to meet a number of other obligations set out in Listing Rule 8 (LR 8). We monitor, guide, and where appropriate refer sponsors for investigation.
Our supervision of sponsors
At an operational level, the regulation of sponsors is governed by the Listing Rules. Sponsors that are authorised firms are also supervised by the FCA’s Supervision Division. The supervision of sponsors is distinct from our supervision of authorised firms and is specifically focused on ensuring sponsors discharge their responsibilities under LR 8.
The dedicated Primary Market Specialist Supervision team, responsible for supervising sponsors, sits within the Primary Market Oversight Department. Our approach to supervising sponsors is risk-based and we typically have a higher level of oversight and interaction with the firms that we perceive present the greatest risk of causing harm to the integrity of the premium listing regime. Given the importance that firms attach to the sponsor role, we frequently meet with senior management in the sponsor’s advisory and execution teams and also with senior members of the Compliance and Legal function.
The sponsor rules do not apply to pricing, allocation, research, sales, underwriting or trading: these areas are dealt with by other sections of our Handbook and are supervised by other areas of the FCA.
The Primary Market Specialist Supervision Team liaises closely and regularly with our colleagues in Wholesale Supervision, Enforcement, Primary Market Oversight, Listing Transactions and Secondary Market Oversight. We liaise with external regulatory bodies such as AIM Regulation, the Takeover Panel and the PRA where relevant.
Primary Market Specialist Supervision Objectives
Through our authorisation and supervisory work, we aim to reduce the risk of harm that may result should:
- a company appoint a sponsor that does not meet our approval criteria or
- where a sponsor breaches the requirements in LR 8.
We are responsible for maintaining the list of approved sponsors that appears on the FCA website. Our work includes reviewing applications from firms seeking sponsor approval, using our powers to suspend or restrict sponsors when necessary, and cancelling a sponsor’s approval, either at its request or unilaterally.
This contributes to us meeting our statutory objective to ensure that the relevant markets function well.
Steps we take to supervise sponsors
The Primary Market Specialist Supervision team uses a variety of methods to monitor whether a sponsor continues to satisfy the approval criteria in LR 8:
- Each sponsor is allocated a relationship manager who monitors the sponsor’s activities and maintains the line of communication with the firm.
- We monitor sponsors’ performance on transactions, taking action where performance falls short of our expectations.
- We review the confirmations that all sponsors submit on an annual basis in relation to them continuing to satisfy the criteria for approval as a sponsor.
- We visit sponsor firms on a periodic and ad-hoc basis to carry out supervisory work to gain insight into whether the firm is meeting the requirements of the sponsor regime and to share best practice.
- We scrutinise, challenge and intervene in relation to sponsor conflicts of interest.
- We maintain the rules and guidance for sponsors and actively engage in policy initiatives affecting sponsor firms.
- We hold briefing sessions and communications meetings with sponsors where we provide feedback, share good practice and provide information on our latest policy initiatives.
Our powers to supervise and discipline sponsors
We can restrict or limit the services performed by sponsors, both at the point of, and post, approval. We may do this where, for example, we consider that a sponsor does not have the relevant experience or appropriate systems and controls to provide the complete range of sponsor services it wishes to undertake.
We can suspend or impose a limitation or restriction on the services a sponsor may perform, in accordance with s88 of FSMA, in order to advance one or more of the FCA’s operational objectives.
For example, we may intervene on the basis that we consider consumer protection or the integrity of the UK financial system may be jeopardised if the sponsor continues to provide sponsor services in a particular set of circumstances.
Some situations where we might intervene include where:
- we take the view that the sponsor is unable to manage an actual or perceived conflict of interest
- there is an unplanned, temporary or permanent loss of experienced member(s) of staff
- the sponsor is in financial distress and about to enter insolvency proceedings
We can also fine and/or publicly censure a sponsor if it is found to have contravened LR 8. Some successful enforcement outcomes involving sponsors can be found here.
Where appropriate we use our powers to reduce the risk of harm to the integrity of the premium listing regime, to ensure sponsors implement the changes required for them to comply with their obligations and to prevent them from breaching our rules.