This week’s edition of Corporate highlights includes the latest updates on Brexit and news of the consultation launched by NEX Exchange on proposed changes to its Growth Market Rules for Issuers.
In this issue:
Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 made
The Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, SI 2018/1403, were made on 19 December 2018. The Regulations amend key pieces of UK domestic law and EU tertiary legislation in relation to markets in financial instruments to ensure that the legislation continues to operate effectively on Brexit. The Regulations come into force partly on 20 December 2018 and fully on exit day. However, the changes made in the Regulations would not take effect on exit day if the UK enters an implementation period according to the explanatory information relating to the Regulations.
These Regulations are made to amend:
the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544; the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017, SI 2017/701; and the Data Reporting Services Regulations 2017, SI 2017/699, and
EU Regulation (EU) 600/2014 on markets in financial instruments (MiFIR); EU Regulation (EU) 2017/565 supplementing EU Directive 2014/65/EU as regards organisational requirements and operating conditions for investment firms and defined terms (MiFID II); and EU Regulation (EU) 2017/567 supplementing Regulation (EU) 600/2014 with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions
The Regulations are intended to ensure that the MiFID II regime continues to operate effectively in the UK after Brexit. Following exit day, they will support the fair, stable and transparent operation of UK financial markets and provide for investors to have the same protections they currently enjoy.
On 19 December 2018, the Financial Markets Law Committee published a paper considering the legal uncertainties arising from the changes proposed by the draft Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 (draft published in October 2018).
Draft Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 published
The government published the draft Financial Services and Markets Act (2000) (Amendment) (EU Exit) Regulations 2019 on 21 December 2018. The explanatory information relating to the Regulations was published on 22 November 2018.
It is proposed that the Regulations will ensure that the UK’s financial services framework can function as a standalone regulatory regime if there is a ‘no deal’ Brexit. In particular, in those circumstances, they will address certain deficiencies in Financial Services and Markets Act 2000 and related domestic legislation. However, the changes made in the Regulations would not take effect on exit day if the UK enters an implementation period according to the explanatory information relating to the Regulations.
For further information, see News Analysis: Brexit Financial Services draft SIs and explanatory information published—22 November 2018.
Draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019 published
Financial Services analysis: On 9 January 2019, HM Treasury (HMT) published the Draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019 and related explanatory information.
The Regulations will make amendments to domestic legislation and retained EU law relating to the process for disclosure and sharing of confidential information by financial services regulators, including domestic, EEA and third-country regulatory and supervisory authorities. This is to ensure that the legal framework can operate effectively in a UK context on Brexit. The changes made in the Regulations would not take effect on exit day if the UK enters an implementation period according to the explanatory information relating to the Regulations.
The draft Regulations provide Parliament and stakeholders with further details on HMT’s approach to onshoring financial services legislation. Technical aspects of the Regulations may change before they are laid before Parliament.
For further information, see News Analysis: Draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019—9 January 2019.
Financial services regulation for corporate lawyers
NEX Exchange seeks views on proposed changes to Growth Market Rules
NEX Exchange has launched a consultation seeking views on its proposed changes to the Growth Market Rules for Issuers (the Rules), including a marked-up version of the Rules incorporating the proposed changes. The proposed changes aim to reflect the new requirements to which the Growth Market will be subject as a designated SME Growth Market. The SME Growth Market designation is a new market category introduced as part of MiFID II. The deadline for responses to the consultation is 4 January 2019.
The key changes proposed are that:
certain specific part of the Rules shall not apply to issuers whose securities were first admitted to trading on another SME Growth Market (such as AIM) and remain admitted to that market, including rules relating to price-sensitive information; standards of disclosure; interests in securities; financial reporting; transactions, including related party transactions; and administration and management
Rule 71 (administration and management) be amended to expressly refer to the Market Abuse Regulation (MAR) and to further clarify the systems and procedures that issuers, persons discharging managerial responsibility (PDMRs) and persons closely associated with PDMRs must have in place to comply with the provisions of MAR
Appendix 3 to the Rules be amended to align the form for notification of PDMR transactions with the form prescribed by MAR, and to modify the glossary to align the meaning of certain terms used in the Rules with their definitions in MAR
Rules 10 and 75 be amended to ensure regulatory announcements, annual reports, and any other information disclosed pursuant to article 17 of MAR remains available on issuers’ websites for a period of at least five years from publication, and
Appendix 2 to the Rules be amended to require fast-track applicants from non-SME growth markets to include a prescribed statement in their admission announcement which clarifies that any historic admission document referred to, and/or the admission announcement itself, are to be treated as the admission document for the purposes of admission to the Growth Market and has not been approved or reviewed by NEX Exchange or the Financial Conduct Authority
For further information, see: LNB News 21/12/2018 18.
Additional news—daily and weekly news alerts
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Dates for your diary
|11 January 2019||Deadline for written submissions to the inquiry launched by the Department of Business, Energy & Industrial Strategy (BEIS) on the future of audit.|
The BEIS Committee’s inquiry will look into the impact of the Competition and Markets Authority’s market study and review of the Financial Reporting Council by Sir John Kingman that focuses on improving quality and competition in the audit market, as well as decreasing conflicts of interest. Evidence hearings are planned to be held in January 2019.
See: LNB News 12/11/2018 32.
|11 January 2019||Deadline for submissions to the BEIS consultation on ethnicity pay reporting.|
BEIS is seeking views on ethnicity pay reporting by employers, including asking questions on what ethnicity pay information should be reported to allow for meaningful action, who should be expected to report and other next steps.
See: LNB News 11/10/2018 75.
|15 January 2019||Deadline for feedback on the consultation being carried out by the Prudential Regulation Authority (PRA) on a draft supervisory statement on banks’ and insurers’ approaches to managing the financial risks from climate change.|
The PRA’s consultation is relevant to all UK insurance and reinsurance firms and groups, banks, building societies, and PRA-designated investment firms. It sets out how effective governance, risk management, scenario analysis and disclosures may be applied by firms to address the financial risks from climate change.
See: LNB News 15/10/2018 25.
|21 January 2019||The first parts of the technical advice published by the European Securities and Markets Authority (ESMA) on the Prospectus Regulation is expected to form the basis for the delegated acts to be adopted by the European Commission from this date (subject to endorsement by the Commission).|
ESMA has published the first part of its technical advice under the Prospectus Regulation. The technical advice covers the areas of format and content of prospectuses, the EU Growth Prospectus and the scrutiny and approval of prospectuses. In developing the advice, ESMA has taken into account responses to three consultation papers published on 6 July 2017.
See: LNB News 03/04/2018 79.
|21 January 2019||Deadline for responses to the update paper published by the Competition and Markets Authority (CMA) in relation to its statutory audit market study.|
On 18 December 2018, the CMA published an update paper to its statutory audit market study identifying serious competition concerns in, and proposing changes to legislation to improve, the audit sector. The CMA is now consulting on proposed legislation to separate audit from consulting services, introduce measures to substantially increase the accountability of those chairing audit committees in firms' and impose a ‘joint audit’ regime giving firms outside the Big Four a role in auditing the UK’s biggest companies.
See: LNB News 18/12/2018 43.
|30 January 2019||The Financial Reporting Council (FRC) is expected to publish a consultation paper on the Stewardship Code on this date.|
A final version of the revised Stewardship Code expected to be published in the summer of 2019.
See FRC: UK Stewardship Code.
|31 January 2019||Deadline for feedback on the discussion paper published by the Financial Conduct Authority (FCA) on the impact of climate change and green finance on financial services (DP18/8).|
The FCA discussion paper seeks input on four areas in which it considers a greater regulatory focus is warranted: climate change and pensions; enabling competition and market growth for green finance; ensuring that disclosures in capital markets give adequate information to investors on the financial impacts of climate change; and the scope for the introduction of a new requirement for financial services firms to report publicly on how they manage climate risks.
See: LNB News 15/10/2018 25.
|1 February 2019||The benchmark policies issued by Institutional Shareholder Services will apply to shareholder meetings on or after this date.|
See: LNB News 20/11/2018 21 and LNB News 07/12/2018 106.
To track key legislative and regulatory developments, see our Trackers:
New Q&As added this week:
To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.
To read about the latest corporate announcements, see our Market Tracker weekly round-up—4 January 2019.