Ashurst Quarterly Debt Capital Markets Update
18 July 2022
18 July 2022
We have a number of different developments to report on in this edition:
ESMA updates Q&As on alternative performance measures (APMs)
On 5 October 2015, ESMA published guidelines (ESMA//2015/1057) relating to the use of APMs in prospectuses or regulated information. These guidelines are enhanced by a Questions and Answers (Q&A) document published by ESMA from time to time, the most recent version of which was published on 1 April 2022.
The latest additions to these Q&As clarify that:
On 3 May 2022 the European Commission launched a call for evidence to assist its assessment of whether current retail investor protection rules (in particular those contained in MiFID II and the EU PRIIPs Regulation regime) have been proven to be effective and efficient. The deadline for responses was 31 May 2022 with the Commission looking to adopt legislative or non-legislative initiatives in Q4 2022.
At the same time the Joint Committee of the European Supervisory Authorities (ESAs) published a report (JC 2022 20) setting out their response to a call for advice on the Commission's review of the EU PRIIPs Regulation. This report is intended not only to suggest amendments to the EU PRIIPs Regulation regime, but also to serve as input to the Commission's work developing a strategy for retail investments (above).
Amongst other things, the ESAs report recommends:
On 9 May 2022, the Joint Committee of the European Supervisory Authorities (ESAs) published a supervisory statement, which
This supervisory statement is addressed to competent authorities but market participants will be expected to follow its guidance.
The issues identified in the supervisory statement concern product features that are primarily relevant for certain types of structured products or derivatives, such as auto-callability, the possibility for early termination, and the payment of coupons or leverage. For each of the issues identified, a description is provided of some of the current practices observed, with reference to specific examples, followed by the ESAs expectations regarding how to improve the drafting of KIDs. For more information, see this Ashurst briefing.
On 26 May 2022, the FCA published Discussion Paper DP 22/2 which is a further instalment of its Primary Markets Effectiveness Review and which largely seeks views on the distinctions between standard listing and premium listing of shares, as well as the role of the sponsor regime. There is nothing in this discussion paper of particular significance to listings of non-equity securities, except that it says that the FCA is still considering its response regarding the duplication between admission to the Official List and admission to a trading venue (such as the London Stock Exchange) and it will publish its views in due course as a further instalment of the Primary Markets Effectiveness Review.
In the recent decision in the proceedings between the Federal Republic of Nigeria (FRN) and JP Morgan Chase (JPMC) ( EWHC 1447 (Comm)), where the FRN's factual case failed, detailed consideration was given to what is meant by "gross negligence" as distinct from "negligence". Since many contractual terms involve an acceptance of liability only where gross negligence can be shown, this case is a useful reminder of what that test involves in practice. For more information, see this Ashurst briefing.
On 27 June 2022, ESMA published a letter that it has sent to the European Commission setting out ESMA's overview of the market for ESG rating providers in the EU.
The letter identifies a number of key characteristics:
The letter concludes that the market for ESG rating and data providers is immature but growing and it bears some resemblance to that which currently exists for credit ratings.
On 28 June 2022, the FCA published its Feedback Statement (FS 22/4) together with Primary Market Bulletin PMB 41, which together outline the FCA's current thinking on the integration of ESG topics in capital markets and describe what the FCA sees as likely future developments.
In summary the FCA's current position is to:
The FCA go on to say that they see a clear rationale for regulatory oversight of ESG data and rating providers, verifiers and SPO providers and, together with HM Treasury, may in future bring them within the FCA's regulatory perimeter. The FCA also states that, as part of HM Treasury's review of the UK Prospectus Regulation, it may be desirable for the UK authorities to develop an appropriate standard for UoP bonds.
On 30 June 2022, the FCA launched a consultation on the wind-down of synthetic sterling LIBOR and how best to retire the remaining US dollar LIBOR tenors. For more information, see this Ashurst briefing.
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