Announced measures to alleviate impact on listed issuers and their auditors in response to COVID-19

The Financial Conduct Authority (FCA), Financial Reporting Council (FRC), Prudential Regulation Authority (PRA) and the European Securities and Markets Authority (ESMA) have announced a series of actions to ensure information continues to flow to investors and support the continued functioning of the UK’s and Europe's capital markets. 

The key takeaways from the announcements are the following:

  • a key focus of all those bodies is on the quality of the disclosures that companies make

  • accordingly, the FCA will allow London listed companies an extra two months to publish their annual financial reports

  • ESMA similarly expects EEA regulators not to prioritise enforcement action against issuersfor delaying annual financial statements by two months and half-yearly financial statements (for periods ending before 1 April) by one month

  • the FCA’s recent request for listed companies to delay publication of preliminary annual results will end on April 5

  • the FCA’s approach is not a complete solution for issuers with securities admitted to regulated markets in the EEA who are still, for the moment, subject to a four-month deadline in those other markets

  • the FCA’s approach is not a solution to contractual issues that late filings might cause

  • FCA, FRC, PRC and ESMA announce measures to alleviate impact on listed issuers and their auditors in response to COVID-19 2

  • companies will have to continue to comply with Market Abuse Regulation (MAR) and put out inside information to the market as soon as possible, subject to any already existing ability todelay – this is an area where quality and timeliness continues to be of paramount importance

  • the need for listed companies to focus on their systems and controls so they have a proper handle on the information needed for an orderly operation of the market

  • the need for specificity of the information that companies make public, with generic disclosure being discouraged and more information about judgements and assumptions being encouraged

  • an acknowledgement that a Board's need to have a "reasonable expectation" of the company’s viability will naturally be underpinned by a much lower level of confidence in the current environment than would normally be the case

  • previous market practices relating to the timing and content of financial information and the audit work that is done must change and it is likely that there will be:

    • modified audit opinions where auditors have been unable to gather the necessary audit evidence to complete the audit in full: for example, by limiting the scope ofthe audit opinion

    • more audited financial statements that include disclosures that management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern

    • changes to timetables for publication of financial information that had been set before the full implications of coronavirus were clear

  • what seems to be firm encouragement to PRA regulated lenders to waive covenant breaches that relate to the coronavirus crisis rather than borrower specific issues.

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Authored by Jonathan Baird, Maegen Morrison, Raj S Panasar, David Simons, and Richard Ufland

Contacts
Jonathan Baird
Partner
London
Maegen Morrison
Partner
London
Raj S Panasar
Partner
London
Daniel Simons
Partner
London

 

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