The Financial Services Authority has released a clarification about disclosure rules for directors, citing “a number of queries relating to disclosure obligations.”
The clarification is contained in a statementpublished on its Web site.
The release, however, does not mention the individual who caused those queries: David Ross, the co-founder of mega chain Carphone Warehouse. Ross has stepped down from that company and resigned as London Mayor Boris Johnson’s Olympic adviser because he used his Carphone Warehouse holdings to secure personal loans for property without telling the board of directors.
In a matter of days, Ross then quit as the chairman of the National Express board of directors and from the Cosalt board of directors, which has father and grandfather had also chaired. He will remain a member of the Cosalt board.
The Tory supporter has defended his actions, and the FSA has not publicly announced a separate investigation.
The Model Code (an Annex to the Listing Rules), is specific that adirector intending to use shares of a company as security requiresclearance from the company before doing so but does not mandatedisclosure to the market. The FSA can see no basis on which adirector could legitimately avoid seeking clearance where his or hershares are to be used as collateral for a financing transaction. Weexpect listed issuers to deal with breaches of the Model Code by theirdirectors.
Grants of security over shareholdings also fall within the Disclosureand Transparency Rules (DTR). Persons discharging managerialresponsibilities (“PDMRs”), such as directors, and their connectedpersons should therefore disclose such transactions to theircompanies, which in turn should make disclosure to the market.
However the rules in DTR are derived from the EU Market AbuseDirective which does not define specifically which transactions fallwithin its disclosure requirements. As a result, there are differentpractices in different European markets in respect of the disclosureof granting of security over shares. We acknowledge that this has ledto a degree of uncertainty among market practitioners in London aboutthe exact requirements. The FSA has therefore concluded that it willnot pursue any enforcement action for cases where directors and theirfirms have not hitherto made the necessary DTR disclosures. Followingthis clarification, the FSA expects all outstanding disclosures to bemade by 23 January.
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