FCA: Primary Market Bulletin 24
On October 3, 2019 the Financial Conduct Authority (FCA) published its 24th Primary Market Bulletin (PMB 24). PMB 24 includes updates on changes made to the FCA Knowledge Base, updates on Brexit and a brief overview of the FCA proposals in relation to the European single electronic format requirements, which apply to issuers on EU Markets from January 1, 2020.
PMB 24 includes the following:
Brexit– The FCA reminds firms that it published special Brexit PMBs earlier in 2019. In preparation for the scenario where the UK leaves the EU without a deal it invites firms to revisit PMB 21, published in February 2019, (new regulatory obligations that market makers and issuers will need to implement for the Short Selling Regulation (SSR) and the Market Abuse Regulation) and PMB 22, published in March 2019 (Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Rules). Those rules will apply immediately in a no-deal scenario unless otherwise indicated.
- Update to PMB 21: the FCA reminds firms using the market maker exemption under the SSR that they should take action as soon as possible to benefit from the market maker exemption under the Short Selling (Amendment) (EU Exit) Regulations 2018 (UK SSR) in the future. It will publish the UK list of exempted shares on exit day on its UK SSR webpage.
- Update to PMB 22: the FCA notes that HM Treasury has determined that EU-adopted IFRS is equivalent to UK-IAS for the purposes of the Transparency Directive and for preparing a prospectus under the Prospectus Directive. Provided the FCA grants third-country issuers an exemption in relation to EU-adopted IFRS, they will be able to use EU-adopted IFRS when preparing consolidated accounts for financial years beginning on or after exit day.
European single electronic format (ESEF) –The FCA proposes a new rule in the Disclosure Guidance and Transparency Rules sourcebook to implement requirements for annual corporate reporting in the ESEF under the Transparency Directive. The FCA has consulted on this proposal in its quarterly consultation paper published on September 6, 2019. The new rule assumes that the UK will remain subject to EU law on January 1, 2020.
A statement in relation to the FCA Knowledge Base – PMB 24 outlines changes to the Knowledge Base, following consultation in PMB 20. Aside from the deletion of its note on UKLA standard comments, it has adopted the following notes without further changes from the earlier drafts
- Compliance with the Listing Principles and Premium Listing Principles (Amendment).
- Primary Markets Oversight and Listing Transactions – decision making and individual guidance process (Amendment).
- Sponsor Service Enquiry Line (New).
- Schemes of Arrangement (New).
The FCA also notes that it is updating its Knowledge Base for the Prospectus Regulation, but in the meantime the guidance should be applied to the extent compatible.
Consultations –PMB 24 includes information on the following two FCA consultations:
- A consultation on the amendment of FCA technical note, Master-feeder structures, to clarify that where one fund is the only feeder into a master fund, the FCA does not consider this a genuine master-feeder structure and LR 15.2.6R and LR 15.4.6R will not apply.
- A consultation on a proposed new technical note, Class testing changes to an investment management agreement where there are unquantifiable benefits, to clarify its approach where the benefit of the transaction is unclear and class tests difficult to apply.
The consultations close on November 14, 2019.
(FCA: Primary Market Bulletin 24, 07.10.19)
ESMA: Consultation paper on Market Abuse Regulation review published
On October 3, 2019 the European Securities and Markets Authority (ESMA) published a consultation paper on the provisions of the Market Abuse Regulation (MAR), as requested by the European Commission.
The consultation paper includes proposals affecting the investor community as a whole, but which are particularly relevant for issuers of financial instruments admitted to trading or traded on a trading venue and their management, investment firms and asset management companies.
Matters on which ESMA seeks views include:
- The possible inclusion of spot FX contracts within the scope of MAR (Section 3).
- The reporting and transparency obligations in relation to buy-back programmes (Section 4).
- The effectiveness of the definition of "inside information", the effectiveness of the mechanism to delay the disclosure of inside information and whether the conditions for the delay of the disclosure of inside information are sufficiently clear. (Sections 5 and 6).
- The protections of the market soundings regime (Section 7).
- The usefulness and content of insider lists (Section 8).
- The MAR thresholds and requirements for persons discharging managerial responsibilities (PDMRs) as well as the scope of application of the trading prohibition including whether it should be extended to issuers and persons closely associated with PDMRs, and whether further exemptions from the closed period should be considered (Section 9).
- The impact of including collective investment undertakings within the scope of MAR (Section 10).
- A possible Pan-European cross-market order book surveillance framework and Cum/ex and multiple withholding tax reclaim schemes (Section 11).
- Cross-border enforcement of sanctions (Section 12).
Responses to the consultation paper are requested by November 29, 2019 and an open hearing on the consultation paper will take place in ESMA’s premises on November 5, 2019.
Based on the responses received to the consultation paper, ESMA intends to submit a final report to the European Commission by Spring 2020.
(ESMA: Consultation paper on Market Abuse Regulation review, 03.10.19)
(ESMA: Consultation paper on Market Abuse Regulation review press release, 03.10.19)
ISS: 2020 benchmark policy consultation launched
On October 7, 2019 Institutional Shareholder Services (ISS) published its 2020 benchmark policy consultation, seeking views on its proposed new and amended voting policies for 2020.
ISS is requesting feedback on several UK & Ireland voting policy changes, including:
The addition of a new policy on board gender diversity– ISS notes that the 2018 UK Corporate Governance Code highlights that appointments and succession plans should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths. Under the new proposed ISS policy, ISS recommend generally voting against the chair of the nomination committee (or other directors on a case-by-case basis) when there are no female directors on the board of widely-held companies. ISS consider mitigating factors would include the presence of a female director on the board at the preceding AGM, together with a publicly available firm commitment to appoint at least one female director within a year.
The development of the ISS policy on the use of discretion by remuneration committees – ISS have proposed that a remuneration committee should disclose how it has taken into account any relevant environmental, social and governance (ESG) matters when determining remuneration outcomes. ISS considers relevant factors may include workplace injuries and fatalities, significant environmental incidents, large or serial fines or sanctions imposed by regulators and significant adverse legal judgments or settlements, amongst other matters.
Comments on the consultation are requested by October 18, 2019. Responses to the consultation will inform the ISS final 2020 benchmark policy changes, which are to be announced during the first half of November 2019. ISS expects to apply the revised policies to shareholder meetings on or after February 1, 2020.
(ISS: 2020 benchmark policy consultation, 07.10.19)
(ISS: 2020 benchmark policy consultation press release, 07.10.19)
HM Treasury: Financial Services (Implementation of Legislation) Bill - Passage through Parliament failed
On October 9, 2019 the UK Parliament confirmed that the Financial Services (Implementation of Legislation) Bill (Bill), which was introduced in February 2019, failed to complete its passage through Parliament before the end of the session. This means the Bill will make no further progress.
The Bill was introduced to authorise the making of provision by reference to certain EU financial services legislation adopted on or before, or no later than two years after, the UK’s withdrawal from the EU.
(Financial Services (Implementation of Legislation) Bill parliamentary web page, 09.10.19)