The Debate: FSA’s approach to listed clubs

FSA gives clubs little guidance

By Charles Barnett

As a sub-sector of London’s stock market, football clubs have been listed since the 1980s, although going public became more prevalent during the mid-1990s.

Last month’s letter from the Financial Services Authority to the nine football clubs on the main market came without warning. Why were they singled out? They represent a tiny proportion of the total value of the UK listed companies market and, in the case of most clubs, there is poor market liquidity resulting in relatively few share transfer transactions.

Their business methods have hardly changed over the past decade and have not been challenged before.

The FSA letter focused on player transfers, but gave little guidance on what the clubs should do.

The clubs could argue that player transfers are part and parcel of the ordinary course of their business, just like winning matches and qualifying for the next stages of cup competitions. Are they notifiable events, or is it simply that the relatively high value of certain recent transfers, such as David Beckham’s move to Real Madrid, and the surrounding media speculation have caused concern?

Clearly, if a club is listed on the market it must follow the rules, but surely the clubs have a strong case for clear guidance from the FSA rather than the regulator simply adopting a ‘one-size-fits-all’ position.

To date, no club has ever issued a circular to shareholders prior to a significant deal concerning a player, yet I would be surprised if some of the transactions over the past few years had not breached the official threshold tests. Even so, I cannot conceive of a situation when a deal could not be finalised until a shareholders’ meeting approved – indeed the transfer window may by then have closed!

In the meantime, listed clubs are under notice and must follow the rules diligently, issuing holding announcements in the event of any leaks. With so many people involved in the transfer of players who are not employed by the listed club, it is almost unheard of for a transfer to be done without nods, winks and rumour.

  • Charles Barnett is a partner at PKF’s football services group.

Shifting the blame won’t work
By Michelle Perry

Football clubs only have a short history as public listed companies.

But irrespective of their length of time on the London Stock Exchange, the nine football clubs with securities on the UKLA official list cannot be allowed to seemingly flout the rules that other quoted companies have to adhere to.

The issue has come to the fore since Ken Rushton, head of listing rules at the Financial Services Authority, sent an open letter to all listed football clubs stating that, in no uncertain terms, if price sensitive information continues to leak out then the FSA would have no hesitation in issuing public censures and slapping clubs with unlimited fines.

I say ‘seemingly’ because since that letter, clubs’ finance directors and their advisers have shifted the blame for these leaks to the ‘number of people involved and the fact that some are not financially sophisticated’.

Well that’s no excuse. Don’t all business transactions involve a number of different parties? And if a lack of financial sophistication is the problem, isn’t it down to the FD or business adviser to educate those people whose actions could impact on the business or its listing?

In reaction, the FDs told Accountancy Age that the FSA’s demands to ensure price-sensitive information is first released on the stock exchange are ‘almost impossible’ to meet.

Granted that many of football’s transactions involve third parties, such as football agents, over whom the club has no formal influence. But if the problem does lie with these people then football clubs have to find a way of stopping it. Failing that, clubs can prepare a holding announcement that can go out immediately to the stock exchange news service if a leak occurs and therefore comply with the rules.

As for the accusations of being ‘singled out’ and that warnings just came ‘out of the blue’, well that sounds like the language of the playground.

Yes, they were singled out, because the FSA considers them either to be close to breaching or already in breach of the rules. And whether it came out of the blue or not is incidental. It’s a level playing field that matters.

  • Michelle Perry is features editor of Accountancy Age.

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