Section 18: Listing rules: disciplinary powers in relation to sponsors
247.Section 88(1) enables the FCA to make listing rules requiring issuers to make arrangements with “sponsors” for certain purposes. A “sponsor” is a person who is approved for the purposes of the rules and whose role, in broad terms, is to advise an issuer on the listing and disclosure requirements imposed by or under Part 6.
248.Subsection (2)(a) extends the provision which may be made in listing rules such that the rules may specify that the FCA may grant approval, or make an existing approval, subject to such limitations or other restrictions as may be specified by the FCA. The rules may also specify that the FCA may agree to suspend (rather than cancel) a person’s approval as a sponsor. An approval may be suspended, for example, where a person has not undertaken a certain form of transactional work for some considerable time (and is not considered to have the relevant up-to-date expertise in a particular area) and will last until the sponsor has demonstrated the competencies necessary to undertake this work.
249.If the FCA proposes to impose limitations or other restrictions to which a person’s approval relates (in accordance with rules made under the new section 88(3)(e)), the FCA must issue a warning notice. If the FCA decides not to impose such limitations or restrictions following consideration of any representations received from the person concerned, it must issue a written notice. If the FCA decides to impose such limitations or restrictions, the FCA must issue a decision notice. Subsection (2)(h) inserts a new subsection (8) into section 88 which lists the different forms of application which may be made under “sponsor rules”. For example, where the FCA has imposed a limitation or other restriction in relation to a person’s approval as a sponsor, that person may apply for the withdrawal or variation of such limitation or restriction. Subsection (3) provides that the power for the FCA to impose limitations or other restrictions on the services to which an approval relates is available in relation to persons who were approved as sponsors prior to the coming into force of subsection (2)(a).
250.Section 89 of FSMA (public censure of a sponsor) enables the FSA to make provision in listing rules enabling it to issue a public censure where the sponsor has been found to have contravened a requirement imposed by rules under section 88(3)(c). Subsection (4) substitutes for section 89 new sections 88A, 88B, 88C, 88D, 88E and 88F.
251.New section 88A(1) and (2) extend the types of disciplinary sanction that may be imposed on sponsors and the circumstances in which such action may be taken. New section 88A(4) to (6) make provision in relation to suspensions or restrictions imposed by way of a disciplinary measure and section 88A(7) makes clear that the FCA may not take disciplinary action in relation to a contravention once the limitation period has expired; the limitation period is three years starting on the day that the FCA first knew of the contravention (subsections (8) and (9)). A suspension or restriction imposed under this section is not to have effect for a period of more than 12 months (subsection (3)). This is consistent with the provision made in relation to suspensions or restrictions of a person’s authorisation to conduct regulated activities (section 206A of FSMA (suspending permission to carry on regulated activities etc)).
252.New section 88B specifies the procedure which the FCA must follow before taking action against a sponsor under new section 88A. In the event that the FCA decides to take any of the forms of action specified in new section 88A(2), the person subject to the measure has the right to refer the matter to the Tribunal (subsection (9)). These arrangements are consistent with the procedure to be followed in relation to disciplinary measures imposed on authorised persons (see sections 205 to 208 of FSMA).
253.New section 88C requires the FCA to prepare and issue a statement of its policy with respect to the imposition of penalties, suspensions, or restrictions under new section 88A to which it must have regard in exercising or deciding whether to exercise its powers under new section 88A. A copy of the statement must be given to the Treasury. Subsection (2) specifies the matters to which the FCA must have regard in determining its policy with respect of the action. A statement issued under this section can be altered and replaced (subsection (3)) and the FCA may charge a reasonable fee for providing copies of a statement (subsection (7)).
254.New section 88D sets out the procedures to be followed by the FCA in respect of statements issued under new section 88C. In particular, before a statement is issued it must be published in draft and a response given to any representations made about it.
255.New section 88E confers a new power on the FCA to suspend, for such period as it considers appropriate, a sponsor’s approval, or to impose, for such period as it considers appropriate, such limitations or other restrictions in relation to the performance of services to which the sponsor’s approval relates. The power can be used where the FCA considers it appropriate to do so for the purposes of advancing one or more of its operational objectives.
256.New section 88F sets out the procedure to be followed where the FCA proposes or decides to take action under the power conferred by new section 88E. Under subsection (1)(a) action may take effect immediately or on such later date as may be specified in a written notice. This aligns with the procedure to be followed in relation to variations of an authorised person’s permission to carry on regulated activities.
