Primary Markets
Primary Markets by Ruari Ewing, Charlotte Bellamy and Katie Kelly
EEA and UK Prospectus Regulation developments The EEA Prospectus Regulation changes proposed as part of the Capital Markets Recovery Package (also known as the “quick fixes”) have now been published in the Official Journal as Regulation (EU) 2021/337 and have entered into force. The central pillar of the changes is the introduction of a new EU Recovery Prospectus, which is designed to facilitate certain secondary equity issues. The EU Recovery Prospectus is not available for issuance of debt securities. Certain other targeted amendments have also been made to the EEA Prospectus Regulation, including: (i) changes to the obligations on financial intermediaries to inform investors of certain information related to prospectus supplements and the associated period for withdrawal rights; and (ii) an increase in the threshold for the exemption from the obligation to publish a prospectus for offers of non-equity securities issued in a continued or repeated manner by a credit institution. These changes are not expected to have a significant impact for ICMA members operating in the wholesale debt space. One aspect that is likely to be of interest to ICMA members is the inclusion of a recital related to ESG disclosure. While this will have no immediate, operative effect, the recital states that information on ESG matters by companies has become increasingly relevant for investors and the Commission should, in the context of its next review of the EEA Prospectus Regulation (which is due by 21 July 2022), assess whether it is appropriate to integrate sustainabilityrelated information in the EEA Prospectus Regulation. Issues relating to current market practice for ESG disclosure in prospectuses is a live topic of discussion among ICMA primary market members. Although it did not form part of the European Commission’s original proposal, Regulation (EU) 2021/337 also included an amendment to the EEA Transparency Directive giving Member States the option to postpone, by one year, the requirement for listed companies to prepare annual financial reports in the European Single Electronic Format for financial years beginning on or after 1 January 2020. This is not considered to be problematic from the perspective of ICMA’s primary market members. In the UK, the results of the UK Listing Review were published on 3 March 2021 and welcomed by the FCA. As reported on page 43 of PAG E 34 | IS S U E 61 | SECOND QUARTER 2021 | ICMAGROUP.ORG
the last edition of this Quarterly Report, ICMA had responded to the corresponding consultation in December 2021. The main focus of the UK Listing Review consultation appeared to be the UK equity markets. This was borne out by the recommendations issued in March, which relate primarily to equity issuances. However, the Review also recommended that HM Treasury conduct a fundamental review of the UK prospectus regime considering, as a minimum, the following areas: • changing prospectus requirements so that in future, admission to a regulated market and offers to the public are treated separately; • changing how the prospectus exemption thresholds function so that documentation is only required where it is appropriate for the type of transaction being undertaken and suits the circumstances of capital issuance; and • use of alternative listing documentation where appropriate and possible, eg in the event of further issuance by an existing listed issuer on a regulated market. The Review also recommended that, as part of the review of the prospectus regime, HM Treasury should consider whether prospectuses drawn up under other jurisdictions’ rules can be used to meet UK requirements. The Review recommends that the goal of the reform of the UK Prospectus Regulation should be an approach much closer to the one that existed in the UK before the introduction of the EEA Prospectus Directive and Prospectus Regulation. The Review considered but dismissed making “tweaks” to the UK prospectus framework (such as raising exemption thresholds, which appeared to have been suggested primarily from an equity angle) in favour of more fundamental reform that separates the requirements for admission to a regulated market from offers to the public. If taken forward, the recommendations mean that the UK Prospectus Regulation regime could depart quite significantly from the EU regime. Related to this, the ICMA response to the UK Listing Review noted that many issuers of wholesale vanilla bonds will wish to continue to access funding on a pan-European basis (ie in both the EU and the UK), as they have done for many years. It is therefore important that any changes that are made to the UK prospectus regime are made in such a way that preserves the smooth functioning of the pan-European wholesale market for new bond issues.
