Related provisions for TC 2.2A.2
29.8 |
Annual financial report |
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9.81 |
R |
[not used] |
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9.8.2 |
R |
[not used] |
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9.8.3 |
R |
[not used] |
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Information to be included in annual report and accounts |
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9.8.4 |
R |
In addition to the requirements set out in DTR 4.1 a listed company must include in its annual financial report, where applicable, the following: |
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(1) |
a statement of the amount of interest capitalised by the group during the period under review with an indication of the amount and treatment of any related tax relief; |
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(2) |
any information required by LR 9.2.18 R (Publication of unaudited financial information); |
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(3) |
details of any small related party transaction as required by LR 11.1.10 R (2)(c); |
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(4) |
details of any long-term incentive schemes as required by LR 9.4.3 R; |
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(5) |
details of any arrangements under which a director of the company has waived or agreed to waive any emoluments from the company or any subsidiary undertaking; |
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(6) |
where a director has agreed to waive future emoluments, details of such waiver together with those relating to emoluments which were waived during the period under review; |
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(7) |
in the case of any allotment for cash of equity securities made during the period under review otherwise than to the holders of the company'sequity shares in proportion to their holdings of such equity shares and which has not been specifically authorised by the company's shareholders: |
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(a) |
the classes of shares allotted and for each class of shares, the number allotted, their aggregate nominal value and the consideration received by the company for the allotment; |
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(b) |
the names of the allottees, if less than six in number, and in the case of six or more allottees a brief generic description of each new class of equity holder (e.g. holder of loan stock); |
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(c) |
the market price of the allotted securities on the date on which the terms of the issue were fixed; and |
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(d) |
the date on which the terms of the issue were fixed; |
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(8) |
the information required by paragraph (7) must be given for any unlisted major subsidiary undertaking of the company; |
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(9) |
where a listed company has listed shares in issue and is a subsidiary undertaking of another company, details of the participation by the parent undertaking in any placing made during the period under review; |
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(10) |
details of any contract of significance subsisting during the period under review: |
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(a) |
to which the listed company, or one of its subsidiary undertakings, is a party and in which a director of the listed company is or was materially interested; and |
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(b) |
between the listed company, or one of its subsidiary undertakings, and a controlling shareholder; |
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(11) |
details of any contract for the provision of services to the listed company or any of its subsidiary undertakings by a controlling shareholder, subsisting during the period under review, unless: |
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(a) |
it is a contract for the provision of services which it is the principal business of the shareholder to provide; and |
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(b) |
it is not a contract of significance; |
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(12) |
details of any arrangement under which a shareholder has waived or agreed to waive any dividends; and |
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(13) |
where a shareholder has agreed to waive future dividends, details of such waiver together with those relating to dividends which are payable during the period under review. |
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9.8.5 |
G |
A listed company need not include with the annual report and accounts details of waivers of dividends of less than 1% of the total value of any dividend provided that some payment has been made on each share of the relevant class during the relevant calendar year. |
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Additional information |
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9.8.6 |
R |
In the case of a listed company incorporated in the United Kingdom, the following additional items must be included in its annual financial report: |
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(1) |
a statement setting out all the interests (in respect of which transactions are notifiable to the company under DTR 3.1.2 R) of each person who is a director of the listed company as at the end of the period under review including: |
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(a) |
all changes in the interests of each director that have occurred between the end of the period under review and a date not more than one month prior to the date of the notice of the annual general meeting; or |
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(b) |
if there have been no changes in the period described in paragraph (a), a statement that there have been no changes in the interests of each director; |
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Interests of each director include the interests of connected persons of which the listed company is, or ought upon reasonable enquiry to become, aware. |
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(2) |
a statement showing the interests disclosed to the listed company in accordance with DTR 5 as at the end of the period under review and: |
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(a) |
all interests disclosed to the listed company in accordance with DTR 5 that have occurred between the end of the period under review and a date not more than one month prior to the date of the notice of the annual general meeting; or |
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(b) |
if no interests have been disclosed to the listed company in accordance with DTR 5 in the period described in (a), a statement that no changes have been disclosed to the listed company; |
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(3) |
a statement made by the directors that the business is a going concern, together with supporting assumptions or qualifications as necessary, that has been prepared in accordance with Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009, published by the Financial Reporting Council in October 2009; |
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(4) |
a statement setting out: |
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(a) |
details of any shareholders' authority for the purchase, by the listed company of its own shares that is still valid at the end of the period under review; |
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(b) |
in the case of purchases made otherwise than through the market or by tender to all shareholders, the names of sellers of such shares purchased, or proposed to be purchased, by the listed company during the period under review; |
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(c) |
in the case of any purchases made otherwise than through the market or by tender or partial offer to all shareholders, or options or contracts to make such purchases, entered into since the end of the period covered by the report, information equivalent to that required under Part 2 of Schedule 7 to the Large & Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) (Disclosure required by company acquiring its own shares etc) ; and |
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(d) |
in the case of sales of treasury shares for cash made otherwise than through the market, or in connection with an employees' share scheme, or otherwise than pursuant to an opportunity which (so far as was practicable) was made available to all holders of the listed company'ssecurities (or to all holders of a relevant class of its securities) on the same terms, particulars of the names of purchasers of such shares sold, or proposed to be sold, by the company during the period under review; |
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(5) |
a statement of how the listed company has applied the Main Principles set out in the UK Corporate Governance Code, in a manner that would enable shareholders to evaluate how the principles have been applied; |
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(6) |
a statement as to whether the listed company has: |
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(a) |
complied throughout the accounting period with all relevant provisions set out in the UK Corporate Governance Code; or |
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(b) |
not complied throughout the accounting period with all relevant provisions set out in the UK Corporate Governance Code and if so, setting out: |
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(i) |
those provisions, if any it has not complied with; |
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(ii) |
in the case of provisions whose requirements are of a continuing nature, the period within which, if any, it did not comply with some or all of those provisions; and |
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(iii) |
the company's reasons for non-compliance; and |
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(7) |
a report to the shareholders by the Board which contains all the matters set out in LR 9.8.8 R. |
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9.8.6A |
G |
(1) |
The effect of LR 9.8.6 R (1) is that a listed company is required to set out a 'snapshot' of the total interests of a director and his or her connected persons, as at the end of the period under review (including certain information to update it as at a date not more than a month before the date of the notice of the annual general meeting). The interests that need to be set out are limited to those in respect of which transactions fall to be notified under the notification requirement for PDMRs in DTR 3.1.2 R. Persons who are directors during, but not at the end of, the period under review need not be included. |
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(2) |
A listed company unable to compile the statement in LR 9.8.6 R (1) from information already available to it may need to seek the relevant information, or confirmation, from the director himself, including that in relation to connected persons, but would not be expected to obtain information directly from connected persons. |
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9.8.7 |
R |
An overseas company with a premium listing must include in its annual report and accounts the information in LR 9.8.6 R (5), LR 9.8.6 R (6) and LR 9.8.8 R (9). |
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9.8.7A |
R |
(1) |
An overseas company with a premium listing that is not required to comply with requirements imposed by another EEA State that correspond to DTR 7.2 (Corporate governance statements) must comply with DTR 7.2 as if it were an issuer to which that section applies. |
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(2) |
An overseas company with a premium listing which complies with LR 9.8.7 R will be taken to satisfy the requirements of DTR 7.2.2 R and DTR 7.2.3 R, but (unless it is required to comply with requirements imposed by another EEA State that correspond to DTR 7.2) must comply with all of the other requirements of DTR 7.2 as if it were an issuer to which that section applies. |
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Report to shareholders |
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9.8.8 |
R |
The report to the shareholders by the Board required by LR 9.8.6 R (7) must contain the following: |
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(1) |
a statement of the listed company's policy on executive directors' remuneration; |
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(2) |
information presented in tabular form, unless inappropriate, together with explanatory notes as necessary on: |
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(a) |
the amount of each element in the remuneration package for the period under review of each director, by name, including but not restricted to, basic salary and fees, the estimated money value of benefits in kind, annual bonuses, deferred bonuses, compensation for loss of office and payments for breach of contract or other termination payments; |
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(b) |
the total remuneration for each director for the period under review and for the corresponding prior period; |
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(c) |
any significant payments made to former directors during the period under review; and |
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(d) |
any share options, including Save-as-you-earn options, for each director, by name, in accordance with the requirements of the Directors' Remuneration Report Regulations; |
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(3) |
details of any long-term incentive schemes, other than share options as required by paragraph (2)(d), including the interests of each director, by name, in the long-term incentive schemes at the start of the period under review; |
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(4) |
details of any entitlements or awards granted and commitments made to each director under any long-term incentive schemes during the period, showing which crystallize either in the same year or in subsequent years; |
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(5) |
details of the monetary value and number of shares, cash payments or other benefits received by each director under any long-term incentive schemes during the period; |
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(6) |
details of the interests of each director in the long-term incentive schemes at the end of the period; |
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(7) |
an explanation and justification of any element of a director's remuneration, other than basic salary, which is pensionable; |
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(8) |
details of any director's service contract with a notice period in excess of one year or with provisions for pre-determined compensation on termination which exceeds one year's salary and benefits in kind, giving the reasons for such notice period; |
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(9) |
details of the unexpired term of any directors' service contract of a director proposed for election or re-election at the forthcoming annual general meeting, and, if any director proposed for election or re-election does not have a directors' service contract, a statement to that effect; |
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(10) |
a statement of the listed company's policy on the granting of options or awards under its employee share scheme and other long-term incentive schemes, explaining and justifying any departure from that policy in the period under review and any change in the policy from the preceding year; |
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(11) |
for money purchase schemes details of the contribution or allowance payable or made by the listed company in respect of each director during the period under review; and |
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(12) |
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a) |
details of the amount of the increase during the period under review (excluding inflation) and of the accumulated total amount at the end of the period in respect of the accrued benefit to which each director would be entitled on leaving service or is entitled having left service during the period under review; |
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(b) |
either: |
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(i) |
the transfer value (less director's contributions) of the relevant increase in accrued benefit (to be calculated in accordance with regulations 7 to 7E of the Occupational Pension Schemes (Transfer Values) Regulations 1996 but making no deduction for any under-funding) as at the end of the period; or |
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(ii) |
so much of the following information as is necessary to make a reasonable assessment of the transfer value in respect of each director: |
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(A) age; |
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(B) normal retirement age; |
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(C) the amount of any contributions paid or payable by the director under the terms of the scheme during the period under review; |
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(D) details of spouses and dependants benefits; |
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(E) early retirement rights and options; |
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(F) expectations of pension increases after retirement (whether guaranteed or discretionary); and |
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(G) discretionary benefits for which allowance is made in transfer values on leaving and any other relevant information which will significantly affect the value of the benefits; and |
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(c) |
no disclosure of voluntary contributions and benefits. |
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Information required by law |
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9.8.9 |
G |
The requirements of LR 9.8.6 R (6) and LR 9.8.8 R relating to corporate governance are additional to the information required by law to be included in the listed company's annual report and accounts. |
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Auditors report |
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9.8.10 |
R |
A listed company must ensure that the auditors review each of the following before the annual report is published: |
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(1) |
LR 9.8.6R(3) (statement by the directors that the business is a going concern); and |
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(2) |
the parts of the statement required byLR 9.8.6 R (6) (corporate governance) that relate to the following provisions of the UK Corporate Governance Code: |
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(a) |
C.1.1; |
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(b) |
C.2.1; and |
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(c) |
C.3.1 to C.3.7. |
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9.8.11 |
R |
A listed company must ensure that the auditors review the following disclosures: |
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(1) |
LR 9.8.8 R (2) (amount of each element in the remuneration package and information on share options); |
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(2) |
LR 9.8.8 R (3), LR 9.8.8 R (4) and (5) (details of long term incentive schemes for directors); |
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(3) |
LR 9.8.8 R (11) (money purchase schemes); and |
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(4) |
LR 9.8.8 R (12) (defined benefit schemes). |
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9.8.12 |
R |
If, in the opinion of the auditors the listed company has not complied with any of the requirements set out in LR 9.8.11 R the listed company must ensure that the auditors' report includes, to the extent possible, a statement giving details of the non-compliance. |
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Summary financial statements |
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9.8.13 |
R |
Any summary financial statement issued by a listed company as permitted under the Companies Act 2006, must disclose: |
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(1) |
earnings per share; and |
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(2) |
the information required for summary financial statements set out in or under the Companies Act 2006. |
1Activity |
Products/Sectors |
Is there an appropriate qualification4requirement? 4 |
|
Designated investment business carried on for a retail client |
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Providing basic advice |
1. |
Stakeholder products excluding a deposit-based stakeholder product |
No |
Advising |
2. |
Securities which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
Yes |
3. |
Yes2 |
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4. |
Packaged products6Retail investment products6 which are not broker funds |
Yes2 |
|
5. |
Friendly Societylife policies where the employee is not reasonably expected to receive a remuneration of greater than £1000 a year in respect of such sales |
No2 |
|
6. |
Friendly Society tax-exempt policies (other than Holloway sickness policies where the Holloway policy special application conditions are met)5 |
Yes2 |
|
7. |
Yes2 |
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8. |
Investments in the course of corporate finance business |
Yes2 |
|
9. |
Yes2 |
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Undertaking the activity in column 2 |
10. |
Yes |
|
11. |
Yes2 |
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Advising and dealing |
12. |
Securities which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
Yes |
13. |
Yes2 |
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4Dealing |
13A.8 |
Securities which are not stakeholder pension schemes, personal pension schemes7 or broker funds |
No |
No |
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13C. |
No |
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Managing |
14. |
Yes |
|
Overseeing on a day-to-day basis |
15. |
Operating a collective investment scheme or undertaking the activities of a trustee or depositary of a collective investment scheme |
Yes |
16. |
Safeguarding and administering investments or holding client money |
Yes2 |
|
17. |
Administrative functions in relation to managing investments |
Yes2 |
|
18. |
Administrative functions in relation to effecting or carrying out contracts of insurance which are life policies |
Yes2 |
|
19. |
Administrative functions in relation to the operation of stakeholder pension schemes |
Yes2 |
|
Mortgage Activity10 and reversion activity carried on for a customer 10 |
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910Advising; arranging (bringing about) an execution-only sale, excluding variations to an existing home finance transaction except where the effect is to change all or part of the home finance transaction from one interest rate to another. See Note 3, which for the avoidance of doubt forms part of this rule. |
20 |
Regulated mortgage contracts for a non-business purpose |
Yes |
20A |
Regulated mortgage contracts for a business purpose |
No |
|
21 |
Yes |
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9Designing scripted questions for execution-only sales |
21A |
Regulated mortgage contracts for a non-business purpose |
Yes |
21B |
Regulated mortgage contracts for a business purpose |
No |
|
22 |
Yes |
||
Overseeing execution-only sales on a day-to-day basis9 9 |
23. |
Yes |
|
Non-investment insurance business carried on for a consumer |
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Advising |
24. |
No |
|
3Regulated sale and rent back activity carried on for a customer |
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Advising |
25. |
No |
|
Overseeing an execution-only sale10 on a day-to-day basis 10 |
26. |
No |
|
Notes: |
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1. |
In the Appendix the heading and types of business specified in the headings are to be read in conjunction with the paragraphs appearing beneath them. |
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2. |
Thus, for example, paragraph 24consistent with the heading above it3, refers only to advice on non-investment insurance contracts given to a consumer.10 3 |
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103. |
For the purpose of product numbers 20, 20A and 21 the activity of arranging (bringing about) referred to in the activity column: (a) includes activity which would be arranging (bringing about) but for the exclusion in article 28A of the Regulated Activities Order; and (b) does not include activities which taken on their own would not fall within the definition of that activity. For these purposes no account should be taken of the fact that for an activity to be a regulated activity it must be carried on by way of business (see PERG 4.3). |
Frequently asked questions about allocation of functions in SYSC 4.4.5 R
Question |
Answer |
|
1 |
Does an individual to whom a function is allocated under SYSC 4.4.5 R need to be an approved person or a certification employee8? |
An individual to whom a function is allocated under SYSC 4.4.5 R will be performing the apportionment and oversight function (CF 8, see SUP 10A.7.1 R17) and an application must be made under section 59 of the Act for approval of the individual before the function is performed. There are exceptions from this in SUP 10A.117 (Approved persons - Application). The apportionment and oversight function does not apply to a relevant authorised person. However, a person performing the role in SYSC 4.4.5R will fall into the certification regime in SYSC 5.2 (Certification Regime), unless the person performing it is an approved person. A person performing the role in SYSC 4.4.5R may be an approved person because of another role that they perform (such as being an executive director).8 1717 |
2 |
If the allocation is to more than one individual, can they perform the functions, or aspects of the functions, separately? |
If the functions are allocated to joint chief executives under SYSC 4.4.5 R, column 2, they are expected to act jointly. If the functions are allocated to an individual under SYSC 4.4.5 R, column 2, in addition to individuals under SYSC 4.4.5 R, column 3, the former may normally be expected to perform a leading role in relation to the functions that reflects his position. Otherwise, yes. |
3 |
What is meant by "appropriately allocate" in this context? |
The allocation of functions should be compatible with delivering compliance with Principle 3, SYSC 4.4.3 R and SYSC 4.1.1 R. The appropriate regulator considers that allocation to one or two individuals is likely to be appropriate for most firms. |
4 |
If a committee of management governs a firm or group, can the functions be allocated to every member of that committee? |
Yes, as long as the allocation remains appropriate (see Question 3). If the firm also has an individual as chief executive, then the functions must be allocated to that individual as well under SYSC 4.4.5 R, column 2 (see Question 7). |
5 |
Does the definition of chief executive include the possessor of equivalent responsibilities with another title, such as a managing director or managing partner? |
Yes. |
6 |
Is it possible for a firm to have more than one individual as its chief executive? |
Although unusual, some firms may wish the responsibility of a chief executive to be held jointly by more than one individual. In that case, each of them will be a chief executive and the functions must be allocated to all of them under SYSC 4.4.5 R, column 2 (see also Questions 2 and 7). |
7 |
If a firm has an individual as chief executive, must the functions be allocated to that individual? |
Normally, yes, under SYSC 4.4.5 R, column 2. But if the firm is a body corporate and a member of a group, the functions may, instead of being allocated to the firm'schief executive, be allocated to a director or senior manager from the group responsible for the overall management of the group or of a relevant group division, so long as this is appropriate (see Question 3). Such individuals may nevertheless require approval under section 59 (see Question 1). If the firm chooses to allocate the functions to a director or senior manager responsible for the overall management of a relevant group division, the FSA would expect that individual to be of a seniority equivalent to or greater than a chief executive of the firm for the allocation to be appropriate. See also Question 14. |
8 |
If a firm has a chief executive, can the functions be allocated to other individuals in addition to the chief executive? |
Yes. SYSC 4.4.5 R, column 3, permits a firm to allocate the functions, additionally, to the firm's (or where applicable the group's) directors and senior managers as long as this is appropriate (see Question 3). |
9 |
What if a firm does not have a chief executive? |
Normally, the functions must be allocated to one or more individuals selected from the firm's (or where applicable the group's) directors and senior managers under SYSC 4.4.5 R, column 3. But if the firm: (1) is a body corporate and a member of a group; and (2) the group has a director or senior manager responsible for the overall management of the group or of a relevant group division; then the functions must be allocated to that individual (together, optionally, with individuals from column 3 if appropriate) under SYSC 4.4.5 R, column 2. |
10 |
What do you mean by "group division within which some or all of the firm's regulated activities fall"? |
A "division" in this context should be interpreted by reference to geographical operations, product lines or any other method by which the group's business is divided. If the firm's regulated activities fall within more than one division and the firm does not wish to allocate the functions to its chief executive, the allocation must, under SYSC 4.4.5 R, be to: (1) a director or senior manager responsible for the overall management of the group; or (2) a director or senior manager responsible for the overall management of one of those divisions; together, optionally, with individuals from column 3 if appropriate. (See also Questions 7 and 9.) |
11 |
How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an overseas firm which is not an incoming EEA firm, incoming Treaty firm or UCITS qualifier? |
The firm must appropriately allocate those functions to one or more individuals, in accordance with SYSC 4.4.5 R, but: (1) The responsibilities that must be apportioned and the systems and controls that must be overseen are those relating to activities carried on from a UK establishment with certain exceptions (see SYSC 1 Annex 1.1.8R). Note that SYSC 1 Annex 1.1.10R does not extend the territorial scope of SYSC 4.4 for an overseas firm. (2) The chief executive of an overseas firm is the person responsible for the conduct of the firm's business within the United Kingdom (see the definition of "chief executive"). This might, for example, be the manager of the firm'sUK establishment, or it might be the chief executive of the firm as a whole, if he has that responsibility. The apportionment and oversight function applies to such a firm, unless it falls within a particular exception from the approved persons regime (see Question 1). |
12 |
How does the requirement to allocate the functions in SYSC 4.4.5 R apply to an incoming EEA firm or incoming Treaty firm? |
SYSC 1 Annex 1.1.1R(2) and SYSC 1 Annex 1.1.8R restrict the application of SYSC 4.4.5 R for such a firm. Accordingly: (1) Such a firm is not required to allocate the function of dealing with apportionment in SYSC 4.4.5R (1). (2) Such a firm is required to allocate the function of oversight in SYSC 4.4.5R (2). However, the systems and controls that must be overseen are those relating to matters which the appropriate regulator, as Host State regulator, is entitled to regulate (there is guidance on this in SUP 13A Annex 2). Those are primarily, but not exclusively, the systems and controls relating to the conduct of the firm's activities carried on from its UK branch. (3) Such a firm need not allocate the function of oversight to its chief executive; it must allocate it to one or more directors and senior managers of the firm or the firm'sgroup under SYSC 4.4.5 R, row (2). (4) An incoming EEA firm which has provision only for cross border services is not required to allocate either function if it does not carry on regulated activities in the United Kingdom; for example if they fall within the overseas persons exclusions in article 72 of the Regulated Activities Order. See also Questions 1 and 15. |
13 |
What about a firm that is a partnership or a limited liability partnership? |
The appropriate regulator envisages that most if not all partners or members will be either directors or senior managers, but this will depend on the constitution of the partnership (particularly in the case of a limited partnership) or limited liability partnership. A partnership or limited liability partnership may also have a chief executive (see Question 5). A limited liability partnership is a body corporate and, if a member of a group, will fall within SYSC 4.4.5 R, row (1) or (2). |
14 |
What if generally accepted principles of good corporate governance recommend that the chief executive should not be involved in an aspect of corporate governance? |
The Note to SYSC 4.4.5 R provides that the chief executive or other executive director or senior manager need not be involved in such circumstances. For example, the UK Corporate Governance Code5 recommends that the board of a listed company should establish an audit committee of independent,9 non-executive directors to be responsible (among other things) for overseeing the effectiveness9 of the audit process and the objectivity and independence of the external auditor9. That aspect of the oversight function may therefore be allocated to the members of such a committee without involving the chief executive. Such individuals may require approval under section 59 in relation to that function (see Question 1). 5 |
15 |
What about incoming electronic commerce activities carried on from an establishment in another EEA State with or for a person in the United Kingdom? |
SYSC does not apply to an incoming ECA provider acting as such. |