As British financial regulator the Financial Conduct Authority (FCA) begins the new year with its new remit following a comprehensive restructure of the methodology by which the organization oversees the United Kingdom’s capital markets activity, a fine has been issued to boutique investment banking and corporate broking firm Execution Noble Ltd (ENCL).
According to the FCA, ENCL failed to tell the regulator’s UK Listing Authority (UKLA) that two thirds of its sponsor team – including the individuals responsible for leading and executing sponsor services – had left between June and November 2013, and continued to market itself as a competent sponsor throughout this period. This is the first use of the FCA’s power to fine sponsors, introduced in 2013.
Sponsors perform a dual role which involves providing expert advice and guidance to current and prospective premium listed companies and providing regulatory assurances to the FCA, designed to protect investors. ENCL’s failure to be open and cooperative with the regulator is particularly disappointing in light of its close contact with the UKLA between September 2011 and June 2013 due to concerns over its low levels of sponsor activity.
Georgina Philippou, acting FCA director of Enforcement & Market Oversight said: ‘Sponsors perform a critical role in maintaining the integrity of the premium listed equity market by providing expert guidance on the listing rules and key regulatory assurances to the FCA. It is vital that the regulator, issuers and investors have confidence in sponsors; and we rely on them having an open and co-operative relationship with us. All sponsors should take note of the consequences if they fail to notify us of material information on time.’
The UKLA sought clarification from ENCL on their staffing situation following reports in November 2013 claiming that an individual responsible for leading and executing sponsor services had joined another firm. The UKLA was then informed of the other departures, including one individual who had left almost five months earlier.
This delay undermined the UKLA’s ability to assess ENCL’s ongoing competence to act as a sponsor, yet ENCL continued to offer these services until November 2013 and provided one sponsor service after the relevant individuals had left. ENCL’s sponsor approval was formally suspended in December 2013 at its request.
Today’s fine reflects the FCA’s objectives to enhance market integrity and ensure consumers are appropriately protected.
For the full announcement from the FCA, click here.