New power for the FCA to suspend shareholder voting rights for DTR 5 breaches

HM Treasury has published draft Regulations to amend the Financial Services and Markets Act 2000 by introducing new sanctions powers for breaches of the Transparency Rules. The most significant change is a new power for the Financial Conduct Authority to apply to court for an order suspending a shareholder’s voting rights.

The changes are being made in order to implement into UK law certain parts of the directive which amended the EU Transparency Directive in 2013. Member states have until 26 November 2015 to implement those amendments into national law. The UK has already implemented some of the changes ahead of time. The draft Regulations will make some of the required changes and the remaining changes will be implemented by amendments to the DTRs, which the FCA will publish separately.

Power to suspend shareholder voting rights

The most noteworthy change is a new section 89NA FSMA which will allow the FCA to apply to court for an order suspending the voting rights of a shareholder, in the event of a breach of the obligation to notify changes in major shareholdings in the Transparency Directive. In deciding whether the breach is serious enough to warrant making the order the court may have regard to:

  • whether the contravention was deliberate or repeated;
  • whether the voteholder ignored warnings or requests for compliance from the FCA;
  • the size of the holding of shares to which the contravention relates;
  • any impact of the contravention on the integrity of the UK financial system; and
  • the effect of the contravention on any company merger or takeover.

Publicity of sanctions

Under a new section 391B FSMA, the FCA will have discretion to delay publication of any sanctions it has imposed for breaches of the Transparency Rules or to make the information anonymous where:

  • the sanction is imposed on an individual and publication of personal data is found to be disproportionate;
  • failing to publish anonymously would seriously jeopardise the stability of the financial system or an ongoing official investigation; or
  • failing to publish anonymously would cause, insofar as it can be determined, disproportionate and serious damage to the persons involved.

Other provisions

Other provisions in the draft Regulations make minor or technical changes to FSMA.

The draft Regulations are available from HM Treasury on request.

The closing date for any comments is 4 September 2015.