Recent regulatory developments of interest to financial institutions and markets. Includes updates relating to the UK FCA consultation on marketing speculative illiquid securities to retail investors, ESMA's revised 2020 work programme and more.

Contents

• Marketing speculative illiquid securities to retail investors: FCA CP20/8
• COVID-19: ESMA revised work programme for 2020
• Prospectus Regulation: draft regulation on exemption in connection with a takeover by means of exchange offer, merger or division

Marketing speculative illiquid securities to retail investors: FCA CP20/8

The UK Financial Conduct Authority (FCA) has published a consultation paper, CP20/8, "High-risk investments: Marketing speculative illiquid securities (including speculative mini‑bonds) to retail investors". In the paper, the FCA is consulting on making its temporary rules on marketing certain high-risk investments permanent and extending them to some similar securities.

The FCA's temporary product intervention (TPI) for speculative illiquid securities (SISs), came into effect on 1 January 2020 and lasts for 12 months. It restricts speculative mini-bonds and preference shares from being mass-marketed to retail investors and improves disclosure of key risks and costs to those certified high net worth and sophisticated retail investors who are still eligible to receive promotions for these types of securities.

In summary, the FCA proposes to:

• make the TPI rules permanent for debentures and preference shares that are currently subject to them (subject to certain changes addressed below);
• expand the scope of the TPI rules so that they apply to any listed bonds with similar features to SISs that are not regularly traded;
• exclude certain securities from the TPI rules where they relate to single-company investments;
• make certain clarifications to the TPI rules, including so that the existing exemptions operate as intended; and
• clarify how financial promotions are restricted for SISs and for non-mainstream pooled investments (NMPIs).

The consultation closes on 1 October 2020 following which the FCA proposes to publish final rules in a policy statement before the end of 2020. Subject to any changes arising from consultation feedback, the FCA intends that rules making the TPI permanent will come into effect on 1 January 2021, so that the measures currently applying continue as permanent rules, along with the additional changes proposed.

COVID-19: ESMA revised work programme for 2020

On 15 June 2020, the European Securities and Markets Authority (ESMA) published a revised work programme for 2020. In response to COVID-19, ESMA has re-assessed its work programme. The results of the assessment are provided in the revised work programme, which includes new items added as high priority and elements that are delayed or removed.

Annex I to the work programme sets out delays to ESMA's planned consultations due to COVID-19. Among other things, these relate to work on sustainable finance, investment management, credit rating agencies, securitisation and market integrity.

In addition, given the new European Parliament and the new European Commission, ESMA intends to keep some flexibility in its planned work programme to respond to potential new initiatives, such as those relating to the capital markets union (CMU).

Alongside the revised work programme, ESMA has published its annual report 2019, which sets out ESMA's key work during 2019.

Prospectus Regulation: draft regulation on exemption in connection with a takeover by means of exchange offer, merger or division

The European Commission has published a draft regulation supplementing the Prospectus Regulation as regards the minimum information content of the document to be published for a prospectus exemption in connection with a takeover by means of an exchange offer, a merger or a division.

The document, defined in the draft regulation as an "exemption document", is the document that is required to be made available to the public for the purposes of the exemption from the requirement for a prospectus under Article 1(4)(f) and (g) and 1(5)(e) and (f) of the Prospectus Regulation.

The consultation closes on 14 July 2020.

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