Capital Markets Update – August 2021

3rd August 2021

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.

July’s news

Consultation on UK prospectus regime

On 1 July 2021, Government published a far-reaching consultation on the UK prospectus regime. This follows recommendations made in Lord Hill’s UK Listing Review report published in March 2021 which asked Government to look at re-designing the prospectus regime including separating out prospectus requirements for an admission to a regulated market and for an offer of securities to the public. The consultation closes on 24 September 2021.

A new chapter for the financial services sector

On 1 July 2021, Government published a policy paper setting out Government’s vision for the future of the financial services sector.

FCA publishes PMB 35

On 2 July 2021, the Financial Conduct Authority (FCA) published Primary Market Bulletin 35, its newsletter for primary market participants. In this special edition, the FCA explains its proposed approach to assessing eligibility and listing applications for companies with cannabis-related activities.

FCA consults on reforms to UK primary markets

On 5 July 2021, the FCA published a consultation on a series of proposed reforms to improve the effectiveness of UK primary markets, along with a discussion of how the FCA might continue to develop the regime to ensure the UK market remains competitive. The consultation ends on 14 September 2021.

FRC publishes statement on ESG challenges

On 7 July 2021, the Financial Reporting Council (FRC) published a Statement of Intent on Environmental, Social and Governance challenges, which identifies areas where there are issues in attaining a fully effective and efficient system of environmental, social and governance (ESG) reporting and identifies various actions that the FRC plans to undertake to support the market.

Minor amendments to Takeover Code published

On 15 July 2021, the Takeover Panel issued Panel Statement 2021/11 announcing the reduction of document fees and charges payable on a takeover and also some minor amendments to the Takeover Code.

FCA publishes 2021/2022 business plan

On 15 July 2021, the FCA published its Business Plan 2021/2022 which sets out its main areas of focus for the coming year.

ESMA publishes statement on SPACs disclosures and investor protection issues

On 15 July 2021, the European Securities and Markets Authority (ESMA) issued a public statement on the prospectus disclosure and investor protection issues raised by special purpose acquisition companies (SPACs). The statement sets out ESMA’s expectations on how issuers should satisfy the specific disclosure requirements of the EU Prospectus Regulation to enhance the comprehensibility and comparability of SPAC prospectuses.

FCA publishes principles on design, delivery and disclosure of ESG

On 19 July 2021, the FCA published a letter to the chairs of authorised fund managers setting out its expectations on the design, delivery and disclosure of ESG and sustainable investment funds. The FCA has developed a set of guiding principles to help ensure that any ESG related claims are clear and not misleading, both at the time of application and on an ongoing basis, so that consumers can make informed choices.

FRC Lab Report published on section 172 reporting

On 19 July 2021, the FRC Financial Reporting Lab published a report on what investors want to see reported in respect of stakeholders, decisions and section 172 statements. The report sets out what investors are looking for in these areas and how companies can improve their reporting to better meet investors’ needs.

FRC publishes report on board diversity

On 20 July 2021, the FRC published a report into board diversity in FTSE 350 companies. The report looks at changes in boardroom diversity and at the qualitative effects in terms of performance, boardroom culture and dynamics.

FCA issues statement on non-enforcement of financial promotion breaches

On 21 July 2021, the FCA published a statement clarifying that it does not propose to take enforcement action for breach of the financial promotion restriction if that breach only comes about because the relevant exemption no longer applies on account of an omission made in the onshoring changes to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, SI 2005/1529.

FCA publishes SPACs rules

On 27 July 2021, the FCA published Policy Statement 21/10 which summarises the policy changes to the Listing Rules in relation to SPACs. The policy statement also contains final rules and confirms amendments to the FCA’s technical note on cash shell companies. The new rules and guidance come into force on 10 August 2021.

ESMA updates its EU Prospectus Regulation Q&As

On 27 July 2021, ESMA published an updated version of its Q&As on the EU Prospectus Regulation to include eight new Q&As.

No amendments to Takeover Code in relation to shadow bids

On 28 July 2021, the Takeover Panel issued Panel Statement 2021/14, which considers the circumstances in which confidential discussions about a possible offer for a Code company should be made public. The Code Committee has decided that no changes are necessary to the existing regime governing the announcement of possible offers.

FCA consults on annual statement on board diversity

On 28 July 2021, the FCA published Consultation Paper 21/24 on proposed changes to the Listing Rules to require companies to publish an annual statement to say whether they have achieved certain targets for gender and ethnic minority representation on their boards. The FCA is also proposing changes to its Disclosure Guidance and Transparency Rules to require companies to ensure that any existing disclosure on diversity policies addresses key board committees, as well as considering broader aspects of diversity. Responses to the consultation are requested by 22 October 2021.

ISS 2021 benchmark policy survey

On 28 July 2021, Institutional Shareholder Services published a survey seeking views for the purposes of developing its voting policies for 2022, along with a separate climate-related policy survey. Both surveys close on 20 August 2021.

FCA consults on changes to decision making

On 29 July 2021, the FCA published Consultation Paper 21/25 on proposed changes to its decision-making procedure which would see some decision-making move from its Regulatory Decisions Committee back to FCA staff.

FRC publishes feedback on new reporting system proposals

On 30 July 2021, the FRC published feedback on its consultation on the future of corporate reporting. In the discussion paper, the FRC explores the potential for a new principles-based framework for corporate reporting, with the aim of making it more agile, effective and accessible to a wide range of stakeholders.

Looking ahead to August 2021

2 August – amendments to the Takeover Code in relation to the reduction of document fees and charges and other minor amendments take effect.

4 August – comments on FCA Guidance Consultation GC21/1 on disclosure requirements under the Prospectus Regulation, are requested by this date.

10 August – new listing rules and guidance relating to SPACs come into force.

20 August – ISS voting policy survey closes.

27 August – HM Treasury consultation on proposed new power to block listings on national security grounds closes.