FSA censures BDO LLP for sponsor failings

1 June 2011 10:45 am | By Natalie Holt

The FSA has today censured BDO LLP for failing to liaise with the UK Listing Authority over a proposed merger deal.

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 Brandenburg.  BDO was made aware 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 UKLA is satisfied there is sufficient information already in the market about the proposed transaction.

Despite these requirements, BDO failed to liaise with the UKLA before the transaction was announced to decide whether Shore Capital’s shares should be suspended. Instead BDO agreed with Shore Capital it would delay contacting the UKLA until after the announcement; and attempted to avoid classifying the transaction as a reverse takeover.

The FSA has concluded that BDO’s conduct did not satisfy the requirements for a sponsor under the Listing Rules.

UKLA head of department Marc Teasdale says: “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 has since made changes to its operations to ensure compliance with the sponsor rules in future.

BDO head of advisory services Gervase MacGregor says: “We have reviewed our guidance for sponsor work; delivered refresher training on the regulatory regime for all corporate finance partners and directors; and established a corporate finance public risk committee which approves all new transactions from the outset, and can also appoint a second partner for reviewing purposes. 

“BDO takes its regulatory responsibilities extremely seriously, and I am confident these changes will ensure all future corporate finance work reaches BDO’s high standards without exception.”

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