The sponsor regime

What is a sponsor?

Sponsors are firms we approve to advise issuers with a listing of equity shares in, or applying for admission of equity shares to, the following categories: 

• the equity shares (commercial companies) category;
• the closed-ended investment funds category; or
• the equity shares (shell companies) category

Sponsors perform a unique, dual role:

• they provide expert guidance and advice on our rules
• they provide us with key confirmations that we rely on when making decisions, for example, to admit securities to the Official List

A firm wishing to become a sponsor must first be approved by us. The list of sponsors[1] includes firms with a range of business models, such as investment banks, corporate finance houses and accounting and legal firms.

The sponsor’s role in ensuring markets function well

The FCA’s strategic objective is to ensure that relevant markets function well. We see maintaining the integrity of the Listing regime as a fundamental part of that objective. 

The sponsor regime supports this by helping to ensure that an issuer is supported and receives high-quality, expert advice during the preparation and submission of an application to list, or whilst undertaking other actions once listed. The FCA is also able to rely on a sponsor’s skill and experience in the course of processing listing applications and when it requires assurance in relation to matters relating to a listing decision. The Sponsor regime is not intended to result in zero failure. Rather, it helps to ensure issuers are able to meet their listing obligations especially around governance and disclosure, which allows investors to make well-informed investment decisions. This helps to increase investors’ confidence and participation in the market for listed securities.

How the sponsor regime meets the needs of multiple stakeholders

The sponsor regime benefits a number of stakeholders including:

• The FCA. We rely on the confirmations given to us by sponsors, for instance in relation to whether a company meets our eligibility requirements, or will be able to comply with its ongoing obligations as a listed company.
• Investors, who will perform their own due diligence but can take additional comfort from the knowledge that the sponsor will carry out due diligence and provide important confirmations to us.
• Issuers seeking or with a listing in the categories to which the regime applies, which are required to appoint a sponsor upon IPO and in targeted circumstances thereafter. Sponsors provide guidance and advice to their clients as well as liaising with the FCA on their behalf. Sponsors help maintain high standards for listing which in turn contributes to the status and reputation of the Official List, to the benefit of listed companies.

Often, a sponsor will already have other advisory or financing relationships with its client and extensive due diligence is typically already being carried out as a result of these other roles.

The due diligence required to meet the sponsor’s obligations to us will often overlap with the due diligence performed for other reasons. These synergies mean the sponsor regime is a cost effective and proportionate way for the FCA to obtain assurance on the ability of an issuer to meet required standards, benefitting all stakeholders.

The legal basis for the sponsor regime

The legal basis for the sponsor regime is set out in s88 of the Financial Services and Markets Act 2000[2] (FSMA), which gives us powers to maintain a list of sponsors, to make rules for sponsors and to discipline sponsors. We also have powers to restrict, limit, suspend, cancel, publicly censure and fine sponsors.

The rules governing sponsors and their conduct of sponsor services are set out in Chapter 24 of the UK Listing Rules sourcebook (UKLR). Rules relating to when an issuer requires a sponsor are detailed in UKLR 4.

Overall, the principles, rules and guidance that define the sponsor regime essentially describe the fiduciary relationship between the FCA and a sponsor.