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Capital Markets Update: February 2024

Welcome to 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.

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January’s news

Judicial review of FCA approval of company prospectus refused

On 9 January 2024, the judgment was published for ClientEarth’s application in December 2023 for permission to apply for judicial review of the Financial Conduct Authority’s (FCA’s) decision to approve the prospectus of UK oil and gas company, Ithaca Energy plc. The High Court refused permission. The court said that it could not be argued that the prospectus failed to properly disclose Ithaca’s climate-related financial risks. The FCA’s interpretation of Article 16(1) of the UK Prospectus Regulation (EU) 2017/1129 was plainly correct on a natural reading. It did not impose a separate requirement for the issuer to disclose its assessment of risk and materiality.

Corporate reporting of late payments

On 10 January 2024, the draft Reporting on Payment Practices and Performance (Amendment) Regulations 2024 were laid before Parliament and published. The current regulations, which require large companies and LLPs to publicly report twice a year on a government web service about their payment practices, policies and performance in relation to paying suppliers, will be extended by seven years and will now expire on 6 April 2031. In-scope companies will be required to disclose new information, including the total value of invoices paid, in addition to the existing reporting requirement as to the volume of invoices. Businesses will also be required to report on the proportion of invoices that are disputed and disclose the percentage of payments that were not paid within agreed terms. The regulations are expected to come into force on 5 April 2024.

Rule review framework published by FCA

On 10 January 2024, the FCA published its final Rule Review Framework, which sets out its approach to reviewing rules contained in the FCA Handbook in line with the new obligation under s 29 Financial Services and Markets Act 2023 (FSMA 2023) to keep its rules under review. FSMA 2023 enhances the rule-making powers of the FCA, enabling it to set detailed rules to replace EU-derived law on financial services.

Takeover Panel publishes Panel Bulletin on Rule 20.1

On 15 January 2024, the Takeover Panel published Panel Bulletin 6 which concerns the application of Rule 20.1 of the Takeover Code to information provided to target directors about the offer or target company. The bulletin highlights the importance of considering the application of Rule 20.1 where a target director has been appointed by a target shareholder.

PERG publishes good practice guide

On 18 January 2024, the Private Equity Reporting Group (PERG) published its sixteenth Annual Report and latest Good Practice Reporting Guide. The guide highlights examples of good practice to help portfolio companies improve the transparency and disclosure of their financial and narrative reporting.

FRC publishes new UK Corporate Governance Code

On 22 January 2024, the Financial Reporting Council (FRC) published a new version of the UK Corporate Governance Code, along with a summary of the key changes and feedback statement on its consultation in May 2023. Following withdrawal by Government of the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023, certain amendments included in the consultation version of the Code have not been incorporated.

FCA publishes Primary Market Bulletin 47

On 26 January 2024, the FCA has published the 47th edition of the Primary Market Bulletin. In this edition, the FCA outlines the recent developments following the UK Short Selling Regulations consultation and the key points arising from the government’s draft statutory instrument.

FRC publishes guidance to accompany revised UK Corporate Governance Code

On 29 January 2024, the FRC published guidance to accompany the revised version of the UK Corporate Governance Code. The guidance is not mandatory but rather intended to support companies and their advisers in applying the code, providing advice, further detail and examples of good practice.

Public Offers and Admissions to Trading Regulations published

On 30 January 2024, the Public Offers and Admissions to Trading Regulations 2024 were published and came into force for limited purposes from that date (the more substantive changes will come into force following the FCA consulting on and finalising the underlying regulatory framework). The regulations were made on 29 January 2024. The regulations will replace retained EU law relating to the prospectus regime and create a UK framework for public offers and admissions to trading. An Explanatory Memorandum has also been published alongside the regulations.

CGI publishes terms of reference for sustainability committees

On 31 January 2024, the Chartered Governance Institute (CGI) published a guidance note on terms of reference for sustainability or ESG committees, which includes a model set of terms of reference. The guidance sets out how to ensure sustainability or ESG committees adopt good practice in accordance with the other committee recommendations in the UK Corporate Governance Code.

Looking ahead to February 2024

1 February – updated 2024 ISS proxy voting policies will apply to shareholder meetings taking place on or after this date.

6 February – closing date for applications to the FCA by authorised firms who wish to continue to approve financial promotions for unauthorised persons.

7 February – new regulatory gateway for financial promotions created by the Financial Services and Markets Act 2023 comes fully into force.

16 February – closing date for responses to proposed changes to the current listing rules relating to sponsor competence set out in FCA Consultation Paper 23/31.

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