1st August 2023
Welcome to the current edition of Capital Markets Update, the monthly briefing from the Corporate Group at Walker Morris rounding up the previous month’s regulatory developments within the equity capital markets and looking ahead to future developments.
On 4 July 2023, following an independent working group review, the Chartered Governance Institute (CGI) published a revised Code of Practice for board reviewers, Principles of Good Practice for listed companies using external board reviewers and Reporting on board performance reviews: Guidance for listed companies.
On 11 July 2023, the Digitisation Taskforce published its interim report regarding reforms to the UK’s shareholding framework. The potential recommendations include introducing legislation to stop the issuance of new paper share certificates and to require dematerialisation of all share certificates. It also recommends that intermediaries should be required, as a condition of participation in the clearing and settlement system, to put in place common technology that enables them to respond to untraced ultimate beneficial owners requests from issuers within a very short timeframe. Feedback on the interim report should be received by 25 September 2023.
On 11 July 2023, Government published the Public Offers and Admissions to Trading Regulations 2023. The regulations will replace retained EU law relating to the prospectus regime and create a new regulatory framework for public offers and admissions to trading. The regulations form the first part of the fundamental overhaul of the prospectus regime. Government intends to legislate for the new regime by the end of 2023.
On 11 July 2023, HM Treasury published a response to its call for evidence on how the Short Selling Regulation (2012/236) could be reformed following the UK’s departure from the EU. Based on the feedback provided, Government plans to make changes to improve the UK’s short selling regulatory framework. Further detail on the new regime will be set out in a draft statutory instrument and FCA rules.
On 11 July 2023, HM Treasury published the Securitisation Regulations 2023, together with a policy note. The draft regulations will replace the version of the EU Securitisation Regulation (2017/2402/EU) retained in UK law after Brexit.
On 11 July 2023, HM Treasury published a consultation paper on proposals for a digital securities sandbox which would be the first financial market infrastructure sandbox established under powers granted by the Financial Service and Markets Act 2023. The aim of the sandbox will be to test how existing UK legislation must change to accommodate digital asset technology and to enable the financial sector to test and adopt digital asset technology.
On 11 July 2023, the European Securities and Markets Authority (ESMA) published a public statement on sustainability disclosures in prospectuses drawn up under the EU Prospectus Regulation. The statement addresses expected ESG disclosure, consistency with non-financial reporting, non-equity securities with a specific ESG component or objective and consistency with advertisements. Although not directly relevant to UK prospectuses, UK firms and market participants are expected to adhere to ESMA guidelines to the extent that are relevant.
On 13 July 2023, the Financial Conduct Authority (FCA) published two further engagement papers as part of its series of engagement papers relating to the new regime for public offers and admissions to trading on UK public markets. The deadline for responding to the questions raised by all the engagement papers is 29 September 2023.
On 13 July 2023, the Takeover Panel announced the publication of its Annual Report and Accounts for the year ended 31 March 2023. The first half of the financial year saw a continuation of the strong deal flow of 2021-22; 29 firm offers were announced, with a total value of £27 billion. However, this was followed by a significant decline in the second half of the year where only 19 firm offers were announced with a total value of under £3bn.
On 17 July 2023, the FCA launched a consultation on new guidance for financial promotions on social media. The FCA is updating its existing guidance on social media and customer communications to ensure that its expectations when communicating about financial products and services on social media are clear and reflect the current and future social media landscape.
On 17 July 2023, the FCA published a webpage which provides that issuers must give certain confirmations concerning Russia and Belarus sanctions when making a vetting, guidance or listing application request to the FCA (including eligibility reviews, review and approval of a document under the Listing Rules or Prospectus Regulation Rules and requests for individual guidance).
On 19 July 2023, the Financial Reporting Council (FRC), in its role as the Secretariat to the UK Sustainability Disclosure Technical Advisory Committee, issued a call for evidence to collect views to inform the proposed endorsement of the IFRS Sustainability Disclosure Standards in the UK.
On 19 July 2023, the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 were published. The regulations amend the Companies Act 2006 to introduce new reporting requirements in relation to distributable profits, resilience and material fraud. They apply to companies with 750 or more employees and an annual turnover of £750 million or more. Initially, the regulations will only apply to UK companies listed on the main market. The regulations will apply in respect of those companies to financial years beginning on or after 1 January 2025. Other in-scope companies (ie very large private companies, non-traded public companies and companies with shares admitted to trading on AIM) will be required to comply with the regulations in respect of financial years beginning on or after 1 January 2026.
On 20 July 2023, the FRC Lab published a report on ESG data distribution and consumption. The report considers how investors access and collect ESG data on companies and how they use it. The report indicates that, as investor demand for ESG data continues to grow, a strong connection between narrative and data reporting is critical to avoid greenwashing and maintain credibility.
On 26 July 2023, the FRC published a report setting out the findings of its review of the first year of mandatory reporting by premium listed companies of TCFD disclosures. It highlighted that, whilst UK premium listed companies had made a significant effort, there was room for improvement in their TCFD disclosures, especially in relation to metrics and targets and the disclosure of the effect of climate change on their financial statements.
On 28 July 2023, the FCA published Handbook Notice 111 which includes its response to feedback received on proposed changes to streamline current rules that require in-scope companies to produce and file with the FCA annual financial reports in an electronic format, and for their financial statements to be in a structured, digitally tagged format.
On 28 July 2023, the Financial Stability Board (FSB) published a press release reflecting on the LIBOR transition and setting out some key messages for firms relating to post transition.
10 August – closing date for responses to FCA consultation on proposed guidance for cryptoasset firms regarding financial promotions.
16 August – closing date for responses to the Department for Business and Trade’s call for evidence on its review into non-financial reporting requirements for UK companies.
21 August – closing date for providing technical comments on HM Treasury’s near-final draft Public Offers and Admissions to Trading Regulations 2023.
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