FSA censures BDO LLP for failings as a sponsor
1st June 2011The Financial Services Authority (FSA) has today censured BDO LLP (BDO) for failings while acting as a sponsor during Shore Capital Group PLC's (Shore Capital) takeover of Puma Brandenburg Limited (Puma). This is the first public censure of a sponsor, by the FSA, in relation to the Listing Rules.
In May 2009 BDO was approached by Shore Capital to provide advice as a sponsor on its proposed merger with Puma. BDO was made aware that the transaction might constitute a reverse takeover due to the significant size of the target company. Shore Capital's shares were listed on the Official List and traded on the London Stock Exchange.
The Listing Rules state that a suspension of the listed company's shares will often be appropriate upon the announcement of a reverse takeover, unless the UK Listing Authority (UKLA) is satisfied that there is sufficient information already in the market about the proposed transaction. These requirements are in place to ensure the smooth operation of the market and in the interests of investor protection and market confidence.
The UKLA relies on sponsors to ensure that issuers meet their obligations under the Listing Rules and it is therefore crucial that sponsors deal with the FSA in an open and co-operative manner, and perform sponsor services with due care and skill.
Despite these requirements, BDO failed to liaise with the UKLA in advance of the announcement of the transaction to ascertain whether Shore Capital's shares should be suspended. Instead BDO:
- Agreed with Shore Capital from the outset that it would delay contacting the UKLA until after the announcement; and
- Attempted to avoid classifying the transaction as a reverse, despite recognising at the time that this strategy was highly unlikely to succeed.
The FSA has concluded that BDO's conduct did not satisfy the requirements for a sponsor under the Listing Rules.
Marc Teasdale, head of department, UKLA said:
"Sponsors provide important protections for investors and the market under the Listing regime. They are entrusted to provide sound and expert guidance to issuers on their obligations, and are relied upon to be open with the UKLA.
"BDO failed in its responsibilities as a sponsor on this transaction and we are sending a clear message with this public censure about the importance we attach to the sponsor role."
BDO and the former partner who led the BDO team on the transaction have accepted the FSA's decision and cooperated fully with the FSA's investigation. BDO have made changes to their operations which are designed to ensure compliance with the sponsor rules in the future.
