Ashurst Quarterly Debt Capital Markets Update Q3 2024
10 October 2024
Welcome to the latest edition of the Ashurst Quarterly Debt Capital Markets Update for 2024. In this edition we summarise the key developments in debt capital markets in the third quarter of 2024.
We have a number of different developments to report on in this edition:
- Corporate Sustainability Due Diligence Directive published
- New UK Listing Rules
- Digital assets as personal property
- UK Public Offers and Admissions to Trading Regulations regime - New FCA Prospectus Rules
- UK Public Offers and Admissions to Trading Regulations regime - Public Offer Platforms
- The end of LIBOR
- Prospectus Regulation – meaning of "transferable securities"
- BRRD and prospectus liability
- Repeal and replacement of the UK PRIIPs Regulation regime
- UK Digital Securities Sandbox opens to applications
Corporate Sustainability Due Diligence Directive published
The Corporate Sustainability Due Diligence Directive (CSDDD) was published in the Official Journal of the European Union on 5 July 2024 and entered into force on 25 July 2024. The CSDDD will introduce a sustainability due diligence duty on large EU companies and non-EU companies with significant EU activity. It will also require in-scope companies to adopt and put into effect transition plans for climate change mitigation which aim to ensure, through best efforts, that the business model and strategy of the company are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5 °C in line with the Paris Agreement. For more information, see this Ashurst briefing.
New UK Listing Rules
On 11 July 2024, the FCA published Policy Statement PS24/6 (Primary Markets Effectiveness Review: Feedback to CP23/31 and final UK Listing Rules) in which it set out its final rules for a new, simplified UK listing regime taking effect from 29 July 2024. These reforms, which follow from the UK Listings Review launched in November 2020, are billed by the FCA as the most significant changes to the UK’s listing regime in over three decades. However, while there are important changes as regards equity securities, the impact with regard to non-equity securities will be far more modest. For more information, see this Ashurst briefing.
Digital assets as personal property
On 30 July 2024, the Law Commission of England and Wales published a report supplemental to its earlier report in June 2023 which recommended legislation to (a) confirm the existence of a distinct category of personal property that can better recognise, accommodate and protect the unique features of certain digital assets (including crypto-tokens and cryptoassets) and (b) remove any uncertainty about the legal status of digital assets as property under English law. This supplement included a draft Bill that, if implemented, would confirm the existence of this distinct category of personal property. On 11 September 2024, the Government introduced the Property (Digital Assets etc) Bill into Parliament which implements the recommendations of the Law Commission. For more information see this Ashurst briefing.
UK Public Offers and Admissions to Trading Regulations regime - New FCA Prospectus Rules
On 26 July 2024, the FCA published a consultation paper (CP24/12) on the new prospectus rules it proposes to make under the Public Offers and Admissions to Trading Regulations 2024 (the POATRs). This follows on from the series of six "engagement papers" published by the FCA in the summer of 2023 seeking views on how the FCA should proceed to use its new rule-making powers under the POATRs.
These proposed new rules, together with the POATRs, will effectively replace the current UK Prospectus Regulation regime. In this Ashurst briefing, we highlight the principal changes that the proposed new rules will make to the format and contents of prospectuses and the circumstances in which they will be used for issues of non-equity securities.
UK Public Offers and Admissions to Trading Regulations regime - Public Offer Platforms
On 26 July 2024, the FCA also published a consultation paper (CP24/13) on the new rules it proposes to make under the POATRs which will govern what will be known as "Public Offer Platforms" (POPs). They key features of this consultation include:
- An offer of securities that is made in the UK by means of a POP will be exempt from the blanket prohibition in the POATRs on public offers of securities in the UK.
- Operating a POP will be an activity regulated by the FCA subject to a new chapter in its Conduct of Business sourcebook (COBS).
- The principal attraction of a POP would appear to be to enable offers of unlisted securities to UK retail investors. This aligns with the FCA expectation that POPs will be used primarily by smaller and medium-sized businesses as a way of improving their ability to raise capital.
- A POP may also be of interest to financial institutions wishing to offer structured products to UK retail investors in certain circumstances.
- The consultation closes on 18 October 2024. The FCA say they aim to finalise the new rules by the end of H1 2025, subject to responses to the consultation.
The end of LIBOR
On 5 September 2024, the FCA confirmed that:
- while it has required ICE Benchmark Administration Limited (IBA) to publish the one, three and six-month US dollar LIBOR settings in synthetic form until the end of September 2024, it will not use its powers to compel IBA to continue to publish the settings beyond this date; and
- the cessation of the last remaining LIBOR settings is the final milestone in the transition away from LIBOR and will mark the end of LIBOR overall.
Prospectus Regulation – meaning of "transferable securities"
In a significant opinion delivered on 5 September 2024, the Advocate General of the Court of Justice of the European Union (CJEU) concluded that Article 2(1)(a) of the Prospectus Directive must be interpreted as meaning that the concept of "transferable security negotiable on the capital market" covers the shares of a holding company which can be held only by provinces and municipalities and whose transfer is subject to the approval of the board of directors, provided that those restrictions do not make the negotiability of those shares on the capital market impossible or extremely difficult. Given that the concept of "transferable security negotiable on the capital market" is effectively carried forward into the EU (and UK) Prospectus Regulation, this opinion's conclusion will likely have similar significance for the interpretation of these Regulations.
BRRD and prospectus liability
On 5 September 2024, the CJEU also handed down its judgment in MSG and others v Banco Santander SA (Cases C-775/22, C-779/22 and C-794/22). In it, the CJEU ruled that certain provisions of the BRRD precluded investors in securities issued by an institution, which subsequently became subject to resolution action, from bringing against that institution or against its successor entity either:
- an action for damages on the basis of flawed and incorrect information provided in the prospectus for those securities; or
- an action for a declaration of nullity in respect of the agreement by which they subscribed for those securities.
Repeal and replacement of the UK PRIIPs Regulation regime
On 19 September 2024, HM Treasury and the FCA announced that:
- the UK’s new retail disclosure framework for what will be known as "Consumer Composite Investments" (CCIs) and which will replace the UK PRIIPs Regulation regime, is expected to be in place in H1 2025, subject to Parliamentary approval and an FCA consultation process; and
- the FCA intends to consult on proposed rules for the CCI regime in the autumn of 2024.
UK Digital Securities Sandbox opens to applications
On 30 September 2024, the Bank of England and the FCA published a joint policy statement (PS24/12), final guidance and other materials setting out their approach to implementing and operating the Digital Securities Sandbox (DSS) and announced that the DSS is now open to applications. For more information see this Ashurst briefing.
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