UK Government Publishes Guidance on Proposals to Onshore the Prospectus Directive and Transparency Directive for Brexit
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  • UK Government Publishes Guidance on Proposals to Onshore Primary Markets Legislation for Brexit
    HM Treasury has published explanatory guidance on a draft statutory instrument, the Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will amend Brexit-related onshoring deficiencies in the U.K. legislation that implemented the EU Prospectus Directive, the Transparency Directive and the Consolidated Admissions and Reporting Directive, which together make up the EU legal framework for primary markets. No deficiencies have been identified for the CARD. The draft Regulations will make the following key changes: 
    1. The Prospectus Directive. Prospectuses "passported" into the U.K. before exit day will be grandfathered for use in the U.K. until their validity expires. However, passporting of prospectus will not be possible after Brexit. Issuers wishing to access the U.K.’s capital markets for offers to the public or admissions to a regulated market will, post-Brexit, be required to secure approval of prospectuses from the U.K. Financial Conduct Authority (regardless of whether they have been approved by a regulator in an EEA member state). The exemption from the requirement to produce a prospectus, which is available to certain public bodies (including EEA states, EEA local authorities, EEA central banks and public international bodies of which one or more EEA states are a member) when they wish to offer certain securities to the public, will be extended to certain third-country public sector bodies and international bodies of which a state is a member. 
    2. The Transparency Directive. A similar extension to certain third-country public sector bodies will be made to the existing exemption, under the Transparency Directive, from the requirement to make certain ongoing disclosures. 
    3. Equivalence determinations. HM Treasury will take on the European Commission’s function of determining the equivalence of third-country jurisdictions under the PD. HM Treasury will also take on the Commission's functions under the PD and TD of assessing whether third-country jurisdictions’ accounting rules meet the necessary standards to be deemed equivalent to the accounting rules adopted by the U.K. 
    The overall intention of the proposed changes is to preserve, as far as possible, the current effects of the prospectus regime, the transparency rules and the listing rules.
    To preserve continuity in a no-deal scenario, given that issuers with securities admitted to trading on a regulated market in the EU are currently required to make use of International Financial Reporting Standards, as adopted by the EU, for their consolidated accounts, HM Treasury intends to issue an equivalence decision in time for exit day determining that EU-adopted IFRS can continue to be used to prepare financial statements under the Tranparency Directive and for preparing a prospectus under the PD. The Department for Business, Energy and Industry Strategy also proposes lay a statutory instrument before Parliament that gives the U.K. the powers to adopt IFRS on Brexit. Once that SI is published, HM Treasury will need to make consequential amendments to the draft Regulations.
    View the explanatory guidance.
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