Shearman & Sterling LLP | Financial Regulatory Developments Focus | ​No-Deal Brexit Changes to UK Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules
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  • ​No-Deal Brexit Changes to UK Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules
    03/22/2019
    The Financial Conduct Authority has published a market bulletin that advises issuers and stakeholders of key changes to the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules that will apply in the event of a no-deal Brexit.

    In the event of a no-deal Brexit, the U.K.’s primary market regime will apply to all issuers that have securities admitted to trading, or have applied for admission to trading, on a U.K.-regulated market or admitted to listing in the U.K., or that are making a public offer in the U.K. The rules will apply regardless of the country an issuer is incorporated in.

    The key changes to the Disclosure Guidance and Transparency Rules are:
    • The removal of the home / host state distinction in sections such as the introduction to the Transparency Rules and the continuing obligations and access to information, meaning that Transparency Rules apply to all issuers with transferable securities admitted to trading on a U.K.-regulated market irrespective of the place of incorporation;
    • Issuers preparing consolidated accounts will have to use International Financial Reporting Standards as adopted by the U.K. (U.K.-adopted IFRS) for all financial years commencing on or after exit day, instead of IFRS as adopted by the EU. However, the Treasury intends to issue an equivalence decision before exit day which means that non-U.K. incorporated issuers will be able to prepare their accounts in accordance with the EU-adopted IFRS;
    • Auditors based in the EEA will become subject to the requirements currently applicable to third-country auditors, including registration with the FRC. However, for financial years beginning before exit day, the current provisions allowing the use of an EEA auditor without registration will remain in force; and
    • Issuers will only be able to use a ‘Primary Information Provider’ (an FCA approved entity) to distribute regulated information. Currently, they are also able to use an incoming information society service (an EEA-approved processing and data storing service provider).

    The key changes to the Listing Rules are:
    • Holders from any jurisdiction will be counted towards the free float so that the calculation will no longer be limited to EEA holders. The free float requirement currently holds that, when an issuer applies for admission of shares to the Official List, it must generally demonstrate that at least 25% of the securities are distributed to the public in one or more EEA states.

    The key changes to the Prospectus Directive are:
    • Prospectuses passported into the U.K. before exit day will remain valid for use in the U.K. until they expire — even where the prospectus expires after exit day. Where a supplement is required for such a prospectus after exit day, the issuer must apply to the FCA for approval of the supplement.
    • Certain public body issuers can issue their securities without producing a prospectus under the Financial Services and Markets Act 2000. This will no longer be limited to public international bodies for which at least an EEA state is a member. Instead, any public international body for which at least a state is a member will be able to issue securities without a prospectus.
    • Governments or local/regional authorities of any state will be able to issue non-equity securities without needing to produce a prospectus. This will no longer be limited to governments and local/regional authorities of EEA states.

    View the market bulletin

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