Market soundings and the FCA: what the cases and the reviews actually show

It would be easy to write about market soundings as if the FCA were fining brokers over them every month. It is not. The regulator published 27 fines in 2024, worth £176 million between them, and not one of them was about a market sounding.

What the FCA does instead is look, steadily and in public. In the last three years it has published two Market Watch newsletters dealing with soundings and a review of how five banks ran them on 50 accelerated bookbuilds. Read alongside the one case everyone in ECM still cites, they make a clear list of what a desk needs to get right, and of what it needs to be able to show afterwards.

The case everyone still cites

In June 2009 Punch Taverns was preparing to raise about £375 million of new equity. Merrill Lynch International was joint bookrunner and co-sponsor, and Punch’s large US shareholders were to be wall-crossed under a procedure designed for the deal.

On 8 June, Greenlight Capital, which held 13.3% of Punch, declined to be wall-crossed. A call with Punch’s management went ahead the next day on a non-wall-crossed basis. During it, the FSA later found, the broker disclosed that Punch was at an advanced stage of preparing a significant equity issue, probably within about a week. Between 9 and 12 June Greenlight sold 11.65 million Punch shares. When the issue was announced on 15 June, the share price fell 29.9%.

In February 2012 the FSA fined the broker £350,000 for improperly disclosing inside information, and fined David Einhorn £3,638,000 and Greenlight £3,650,795 for trading on it. Three things from the case still matter:

• Declining to be wall-crossed did not make the call safe. What counted was what was said on it, not the label it was given.
• Both sides were fined. The disclosing side’s job is to control what it says and to whom, whatever the investor has agreed to.
• The case turned on the record. The broker’s final notice reproduces a transcript of the call. The same document that can defend a desk is the regulator’s best evidence against it.

A second case from the same year makes a related point. The FSA fined Ian Hannam, then chairman of capital markets at J.P. Morgan Cazenove, £450,000 over two emails sent in 2008 that passed on inside information he had received from his client, Heritage Oil. The FSA accepted that he had not set out to commit market abuse, and the Upper Tribunal upheld the finding in 2014. The breach was the disclosure itself.

The regime that came after

Both cases predate the Market Abuse Regulation, which has applied since July 2016 and was kept in UK law after Brexit. Article 11 of UK MAR now sets out how a disclosing market participant, the issuer or the broker acting for it, can sound investors and disclose inside information lawfully. Before a sounding it has to consider whether inside information will be disclosed and write down its conclusion and its reasons. Before disclosing anything, it needs the investor’s consent, and has to tell them they must not trade on the information or use it to cancel or amend an order, and that they must keep it confidential. It records what was disclosed, to whom and when, and tells each investor once the information has stopped being inside information.

Follow those procedures and the disclosure is treated as made in the normal course of business. That is a safe harbour, and like any safe harbour it only protects the firms that can show they stayed inside it. We have set out what that record needs to contain in a separate article.

What the FCA has found since

The gap before disclosure (Market Watch 75, October 2023)

The FCA had seen investors trade in the window after a broker’s first contact but before any inside information was disclosed, having worked out the deal from what they already knew. The regime protects the broker’s disclosure. It does not protect anyone from an investor who trades on what they have guessed.

So the FCA’s advice to disclosing firms was practical: say at the very start that the call is a market sounding, so the investor can decline; limit the first contact to what the investor needs in order to decide; review the script at every stage; take extra care with stocks where few names could fit the description; and keep the time between first contact and consent as short as possible.

Small and mid-cap brokers (Market Watch 83, September 2025)

This edition drew on reviews of corporate finance firms advising small and mid-cap companies, the part of the market DealBridge was built for. Four findings stand out:

• Long lists with nobody checking them. Some firms sounded relatively large numbers of investors with no process for deciding whether the number, or each name, was appropriate. The FCA’s example of good practice was simple: a senior person or committee approves the initial list and every name added later.
• Gatekeepers, and the people behind them. After a gatekeeper had agreed to a sounding, some firms emailed colleagues at the same investor who had not been wall-crossed, and email chains grew without anyone controlling who was on them.
• The same information for everyone. The rules require every investor sounded on a transaction to receive the same level of information. The best practice the FCA saw was one approved script used for every sounding.
• The second broker. Where the issuer’s broker asks another broker to sound that broker’s own contacts, without the issuer knowing, the FCA’s view is that the second broker falls outside Article 11, and so outside its safe harbour.

Fifty accelerated bookbuilds (April 2026)

The most recent review looked at UK equity transactions over £50 million run by five banks between January 2023 and June 2025, concentrating on 50 accelerated bookbuilds worth about £32 billion. On average 33 investors were sounded per deal, and the largest exercise approached 87. Trading volume in the stock fell by an average of 13% while soundings were under way.

The finding most worth reading twice: among deals that sounded more investors than average and reached high coverage, demand did not grow meaningfully after launch. Approaching more investors did not reliably mean a bigger book. The FCA does not set a limit on how many investors can be sounded, but it points out that the risk of a leak grows with the scale of the exercise, and asks firms to consider whether their procedures reflect how large their soundings actually are.

What a desk should be able to show

Put the cases and the reviews together, and the questions a desk should be ready to answer about any sounding come down to these:

1. Who approved the list, and who added each name after it was agreed.
2. Who was approached, by whom on your side, through which gatekeeper and on behalf of which fund managers.
3. That consent came first, before any inside information, with the warnings given.
4. That every investor heard the same thing, from the same script or template.
5. That nobody outside the wall reached the material, including colleagues of a gatekeeper who agreed.
6. When each investor was cleansed, individually.
7. All of it, five years later, after the people who ran the deal have moved on.

Where DealBridge fits

DealBridge does not make the judgements for you. Who belongs on the list, and whether information is inside information, remain decisions for the desk and its compliance team. What it does is keep the record of those decisions while the deal runs, rather than leaving someone to rebuild it from inboxes afterwards.

The target investor list lives in one place for the whole transaction. Approaches go out by templated email, so every investor sounded on a deal receives the same wording, or are logged as phone calls, and either way against the named person who made them. Gatekeepers are recorded with the fund managers they act for. DealBridge sends transaction material only to investors who have agreed to be wall-crossed, every action is timestamped and attributed to a named user, and the whole record exports in one click.

You can read more about market sounding in DealBridge, or book a demo to see the record it keeps on one of your own transactions.