On 28 April 2020, the FCA published a Dear CEO letter entitled Ensuring fair treatment of corporate customers preparing to raise equity finance.
The Dear CEO letter explains that the FCA has heard reports of a small number of banks failing to treat their corporate clients fairly when negotiating new or existing debt facilities, as clients navigate the current exceptional circumstances of the COVID-19 pandemic. In particular, the FCA states that it has heard reports that banks may have used their lending relationship to exert pressure on corporate clients to secure roles on equity mandates that the issuer would not otherwise appoint them to. In some cases, these roles may be ‘in name only’ with few or no additional services being provided in exchange for a share of the fee pool. The FCA will be looking into this further, but wants any practice of this nature to cease immediately.
The FCA also reminds firms of their obligations under the Market Abuse Regulation (MAR) concerning the identification, handling and disclosure of inside information received in connection with the renegotiation of a corporate client’s existing facilities. This includes details of a potential equity capital markets transaction. Depending on the circumstances, sharing such information within a lending bank may be inconsistent with that bank’s obligations under MAR