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Capital Markets Update – August 2020

Business Meeting 10 Print publication

04/08/2020

July’s news

PLSA and Investor Forum publish stewardship toolkit

On 1 July 2020, the Pensions and Lifetime Savings Association (PLSA) issued a Press Release stating that it had partnered with the Investor Forum to publish a Toolkit for pension schemes to use when evaluating the effectiveness of their asset managers’ engagement and delivery of stewardship. The Toolkit provides a framework, and gives practical insights, to help pension schemes effectively align their investment chain by establishing a clear understanding of their expectations for stewardship and engagement.

FRC publishes review of going concern policies

On 2 July 2020, the Financial Reporting Council (FRC) published a review of auditors’ policies and procedures in relation to going concern in light of the COVID-19 situation. The review covers requirements relating to audited financial statements and is based on the seven largest UK audit firms.

FRC publishes update on operational separation of audit practices

On 6 July 2020, the FRC published its Principles for the operational separation of the audit practices of the Big Four accountancy firms from their wider businesses. The stated objectives of the FRC are to improve audit quality and audit market resilience by ensuring a separation between the audit practice and the rest of the firm.

Commission invites feedback on CMU Action Plan

On 7 July 2020, the European Commission published its Roadmap related to a communication regarding its Capital Markets Union Action Plan and opened a feedback period until 4 August 2020.

ICSA publishes guidance on shareholder meetings

On 9 July 2020, ICSA, The Chartered Governance Institute issued a press release announcing that it had published Guidance on Shareholder meetings under the Corporate Insolvency and Governance Act 2020. The guidance is an updated version of the joint guidance produced in March 2020 on planning AGMs in the light of the COVID-19 pandemic.

Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020 published

On 9 July 2020, the Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020 were published on legislation.gov.uk. The regulations transpose into UK law certain provisions of the Shareholder Rights Directive (as amended by the Shareholder Rights Directive II) by amending the Companies Act 2006. The new provisions relate to the right for a shareholder to request information from the company to enable them to determine that their vote has been validly recorded and counted. The regulations come into force on 3 September 2020.

Financial Reporting Lab launches corporate disclosure project

On 9 July 2020, the FRC’s Financial Reporting Lab published an Invitation for investors and companies to participate in a new project relating to corporate disclosures on stakeholders, including section 172 statements. The project will seek to identify how information about stakeholders can be reported most effectively by examining existing practice and understanding investors’ needs in this area.

Response to consultation on renewed sustainable finance strategy

On 15 July 2020, the European Supervisory Authorities issued a Joint Letter to the European Commission responding to its consultation on a renewed sustainable finance strategy.

ESMA publishes revised disclosure requirements guidelines

On 15 July 2020, the European Securities and Markets Authority (ESMA) issued a Press Release announcing that it had published a revised version of its disclosure guidelines under the Prospectus Regulation, and a final report providing an overview of the responses it received to its related consultation.

FRC publishes annual report

On 17 July 2020, the FRC published its Annual Report for 2019/20 which sets out the FRC’s progress against recommendations for change of the FRC itself and in the activities it regulates.

Proposed reforms to regulatory framework for financial promotion approvals

On 20 July 2020, HM Treasury published a consultation on proposed reforms to the regulatory framework for the approval of financial promotions under the Financial Services and Markets Act 2000. Any firm wishing to approve unauthorised firms’ financial promotions would first need to obtain the FCA’s consent. The consultation closes on 25 October 2020.

FRC publishes results of company reporting review

On 21 July 2020, the FRC published a Report following completion of its first thematic review of company reporting since the start of the COVID-19 pandemic. As well as setting out the key findings of the review, the report provides guidance and examples of better practice that companies can use when preparing annual and interim reports in order to improve their disclosures.

Guidance published on changes to turnover and share of supply tests

On 21 July 2020, the Government published Guidance on the changes to the turnover and share of supply tests for mergers in the Enterprise Act 2002 as effected by the Enterprise Act 2002 (Share of Supply) (Amendment) Order 2020 and the Enterprise Act 2002 (Turnover Test) (Amendment) Order 2020, both of which came into force on 21 July 2020.

FCA launches consultation to delay mandatory ESEF reporting

On 22 July 2020, the Financial Conduct Authority (FCA) launched a Consultation to delay by one year the mandatory European Single Electronic Format (ESEF) requirements for annual financial reporting under the Transparency Directive to allow companies more time to prepare in the light of the COVID-19 pandemic. The consultation closes on 28 August 2020.

European Commission adopts a Capital Markets Recovery Package

On 24 July 2020, the European Commission issued a Press Release announcing its adoption of a legislative proposal to amend the Prospectus Regulation with the aim of facilitating the recapitalisation of companies affected by the COVID-19 pandemic. The Commission proposes the creation of an ‘EU Recovery Prospectus’, a new simplified, short-form prospectus, for companies that have been listed for at least 18 months on a regulated market or an SME growth market (which includes AIM in the UK). Although no timeframe has been provided, assuming that the amending regulation enters into force prior to 31 December 2020, the changes will be directly applicable in the UK.

FCA publishes Handbook Notice 79

On 24 July 2020, the FCA published Handbook Notice 79, which covers amendments to the FCA Handbook and other materials made on 30 June, 13 July and 23 July 2020.

Commission publishes sustainable investment roadmap

On 28 July 2020, the European Commission published a Roadmap on its proposal for a delegated regulation which sets out methodologies and indicators for undertakings to use when determining the extent to which their economic activities can be considered environmentally sustainable under the Taxonomy Regulation. Feedback is requested by 8 September 2020.

PLSA publishes guide on investment disclosure duties

On 31 July 2020, the PLSA published Guidance to assist pension fund trustees in complying with the new requirements for them to produce an annual ‘Implementation Statement’ disclosing how they have followed the objectives and policies set out in the relevant scheme’s Statement of Investment Principles.

Looking ahead to August 2020

4 August 2020 – closing date for the European Commission’s feedback period for its roadmap regarding its Capital Markets Union Action Plan.

28 August 2020 – closing date for the FCA’s consultation on proposed changes to the Disclosure Guidance and Transparency Rules sourcebook to delay the mandatory European Single Electronic Format requirements for annual financial reporting under the Transparency Directive by one year.

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