April 19, 2018 / 6:13 AM / a month ago

Britain's FCA sends 'Dear CEO' letter to preference share issuers

LONDON, April 19 (Reuters) - Britain’s financial regulator on Thursday published a letter to issuers of listed irredeemable preference shares, urging them to ensure their investors have all information necessary to properly assess the risks and rewards attached to such shares.

The Financial Conduct Authority (FCA) is reviewing certain fixed income shares, particularly those shares that are described as being perpetual, irredeemable or in some other way that suggests permanence, the ‘Dear CEO’ letter said.

Listed companies will need to consider whether any intention to cancel or otherwise retire a class of irredeemable shares, or similar shares, at a price based on factors other than prevailing market price, or their company’s deliberation on any such intention, constitutes inside information, said the letter.

“We recognise that there is a tension between investors’ desire to see a permanent resolution to any remaining concerns and the desire of company boards not to limit their (and their successors’) scope for action,” it said.

The ‘Dear CEO’ letter on the subject of preference shares follows a phase of instability in the pricing of such instruments after insurer Aviva announced an intention to cancel certain irredeemable shares it had issued at or close to par value.

Aviva later scrapped its plan following a backlash among investors but other listed companies with irredeemable shares, or similar types of shares, have not clarified their position, the FCA said. (Reporting by Maiya Keidan, editing by Sinead Cruise)

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