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Capital Markets Update: December 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.

Capital Markets Update April 2024

November’s news

HMRC publishes guidance on its approach to schemes of arrangements and restructuring plans in debt restructurings

On 1 November 2023, HMRC published guidance for insolvency practitioners as to the circumstances in which HMRC will support a proposed scheme of arrangement under Part 26 Companies Act 2006 or restructuring plan under Part 26A CA 2006 to effect a debt restructuring of a company.

FCA publishes final guidance on cryptoasset financial promotions

On 2 November 2023, the Financial Conduct Authority (FCA) published its finalised guidance on cryptoasset financial promotions. The guidance provides information on, and details the FCA’s expectations for, the communication and approval of financial promotions relating to qualifying cryptoassets.

QCA publish proposals to reinvigorate the UK’s public equity markets

On 6 November 2023, the Quoted Companies Alliance (QCA) published a paper that put forward several proposals that it believed should be included in the Autumn Statement. The QCA suggests that the solutions could have an almost immediate impact on reinvigorating the UK’s public equity markets by improving trading volumes, enhancing investor appetite, and boosting corporate confidence.

Draft financial promotions order published

On 7 November 2023, a draft version of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No 2) Order 2023 was published, together with an explanatory memorandum. In summary the order (i) increases the financial thresholds to be eligible for the high net worth individual exemption to income of at least £170,000 in the last financial year, or net assets of at least £430,000 throughout the last financial year; (ii) amends the eligibility criteria for the self-certified sophisticated investor exemption; and (iii) requires businesses to provide details of themselves in any communications made using the exemptions. The regulations come into force on 31 January 2024.

FRC publishes policy update on UK CGC

On 7 November 2023, the Financial Reporting Council (FRC) published a policy update in relation to its consultation to amend the UK Corporate Governance Code (CGC). The FRC intends to take forward only a small number of the original proposals set out in the consultation and to stop development of the remainder. Specifically, it will progress its original proposals on internal controls (with a few revisions) and a small number of changes that streamline and reduce duplication associated with the CGC. The FRC intends to publish an updated CGC in January 2024.

Transition Plan Taskforce consults on sector-specific guidance

On 13 November 2023, the Transition Plan Taskforce published a consultation on seven sector-specific “deep dives” providing guidance for preparers and users of private sector climate transition plans. The sectors covered are asset managers, asset owners, banks, electric utilities and power generators, food and beverage, metals and mining, and oil and gas. The consultation is open until 29 December 2023.

QCA publishes revised version of corporate governance code

On 13 November 2023, the Quoted Companies Alliance (QCA) published a revised version of its corporate governance code. The new version of the code, which is tailored towards small and mid-sized UK quoted companies, will apply in respect of accounting periods commencing on or after 1 April 2024.

Criminal liability for corporates

On 14 November 2023, the Criminal Justice Bill was introduced to Parliament and received its first reading. The Bill proposes reforms to various aspects of criminal law, including a further expansion of the identification doctrine to allow criminal liability to be attributed to companies and partnerships whose senior managers commit any criminal offences while actually or apparently authorised to do so.

IOSCO publishes policy recommendations for crypto markets

On 16 November 2023, the International Organization of Securities Commissions (IOSCO) published a final report setting out its policy recommendations for crypto and digital asset markets. The principle-based and outcomes-focused recommendations are based on the principle of “same activity, same risk, same regulatory outcome”.

FRC publishes review of corporate governance

On 16 November 2023, the FRC published its annual review of corporate governance assessing the quality of reporting against the UK Corporate Governance Code. The FRC finds ongoing improvements in the quality of reporting against the UK Corporate Governance Code, but also identifies areas where many companies are still falling short.

Glass Lewis publishes 2024 voting guidelines

On 16 November 2023, Glass Lewis published its 2024 UK proxy voting policy guidelines. Amendments to the 2023 guidelines include in relation to director attendance at meetings, interlocking directorships, director accountability for climate-related issues and cyber risk. These policy guidelines will apply for meetings from 1 January 2024.

FCA censures former FTSE 100 company

On 17 November 2023, the FCA announced that it had imposed a public censure on NMC Health plc for committing market abuse contrary to Article 15 of the EU Market Abuse Regulation. The FCA found that the former FTSE 100 company had published a series of financial statements and several clarificatory announcements during 2019 and 2020 that contained materially inaccurate information about its debt position in circumstances where the company knew, or ought to have known, that the information was false or misleading.

ISS announces 2024 benchmark voting policy consultation

On 21 November 2023, Institutional Shareholder Services (ISS) launched its request for comments on the proposed benchmark policy changes for 2024. The ISS is consulting on a more limited set of proposed voting policy changes for 2024, none of which relate to the UK. ISS expects to announce its final 2024 benchmark policy changes in December 2023.

HM Treasury publishes draft Short Selling Regulations 2024

On 22 November 2023, HM Treasury published a policy note on the Short Selling Regulations 2024, a draft version of which was published alongside the note. The policy note confirms that the current requirements placed on investors when taking out short positions in sovereign debt or credit default swaps and the related reporting requirements under the UK SSR will be removed, but the FCA’s emergency intervention powers for short selling of these products will be retained.

HM Treasury publishes response to Digital Securities Sandbox consultation

On 22 November 2023, HM Treasury published a formal response to its consultation on proposals for a Digital Securities Sandbox (DSS). HM Treasury intends to set out the framework for the DSS in legislation, with the regulators given appropriate flexibility to manage requirements for participating entities. It has received expressions of interest from 19 entities considering participating in the DSS, comprising a mixture of regulated firms, incumbent financial market infrastructures and new entrants.

Government publishes response to proposed amendments to payment practices regulations

On 22 November 2023, Government published its response to the January 2021 consultation on amending the Reporting on Payment Practices and Performance Regulations 2017. The regulations require the UK’s large companies and LLPs to report on a half-yearly basis their payment practices, policies and performance. The regulations will be extended beyond their current expiry date of April 2024.

New draft regulations governing UK prospectus regime

On 28 November 2023, the draft Public Offers and Admissions to Trading Regulations 2023 were published, along with a draft explanatory memorandum. The regulations will replace retained EU law relating to the prospectus regime and create a UK framework for public offers and admissions to trading.

Looking ahead to December 2023

1 December – FCA transitional arrangements relating to minimum capitalisation for shell companies undertaking a reverse takeover will end on this date.

11 December – changes to the Takeover Code relating to Rule 21 restrictions on frustrating action will become effective on this date.

14 December – closing date for call for evidence on Scope 3 emissions reporting and the current SECR framework.

18 December – closing date for FCA and PRA parallel consultations on proposals to introduce a new regulatory framework on diversity and inclusion in the financial sector.

26 December – provisions in the Economic Crime and Corporate Transparency Act 2023 that will attribute criminal liability to companies where senior managers commit certain economic crime offences come into effect on this date.

31 December – Parker Review Committee recommendations that each FTSE 350 company should set an appropriate target for the percentage of its senior management team who identify as being from an ethnic minority by this date.

John
Hamer

Chair of the LLP, Partner

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Debbie
Jackson

Partner

Corporate

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Richard
Naish

Partner

Head of Corporate

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Daniel
O'Gorman

Partner

Corporate and Head of International

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Jo
Stephenson

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Corporate

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Oliver
Duke

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Corporate

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Thomas
Mieszkowski

Partner

Corporate

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