Essential Corporate News - Week ending June 25, 2021

FCA: Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets – CP 21/18

On June 22, 2021, the Financial Conduct Authority (FCA) published new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The FCA proposes the following:

•  Extend the application of climate-related disclosure requirements for commercial companies with a UK premium listing to issuers of standard listed equity shares (excluding standard listed investment entities and shell companies), as recommended by the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) in 2017 (CP 21/18).
•  Introduce TCFD-aligned disclosure requirements for asset managers, life insurers and FCA-regulated pension providers, with a focus on the information needs of clients and consumers (CP 21/17). 

The FCA proposes to implement a new rule and associated guidance that will mirror the existing rule in Listing Rule 9.8 and its associated guidance that was introduced for premium listed commercial companies in December 2020. The new rule in Listing Rule 14 would require issuers of standard listed equity shares to include a statement in their annual financial report setting out:

• whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in the annual financial report;
• where they have not made disclosures consistent with some or all of the TCFD’s recommendations and/or recommended disclosures, an explanation of why and a description of any steps they are taking or plan to take to make consistent disclosures in the future, and the timeframe within which they expect to make those disclosures;
• where they have included some, or all, of their disclosures against the TCFD’s recommendations and/or recommended disclosures in a document other than their annual financial report, an explanation of why; and 
• where in their annual financial report (or other relevant document) the various disclosures can be found.

The FCA propose that the new rule take effect for accounting periods beginning on or after January 1, 2022. 

The FCA is also seeking views on environmental, social and governance (ESG) issues in capital markets, including on green and sustainable debt markets and the increasingly prominent role of ESG data and rating providers. 

Responses to both consultations are requested by September 10, 2021.

(FCA: Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets – CP 21/18, 22.06.2021)

(FCA: Enhancing climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers – CP 21/17, 22.06.2021)

(FCA: FCA consults on further climate-related disclosure rules – press release, 22.06.2021)

HM Treasury: Response to regulatory framework for approval of financial promotions

On June 22, 2021, HM Treasury published the response to its July 2020 consultation on a regulatory framework for approval of financial promotions.

In the earlier consultation HM Treasury proposed that the Financial Services and Markets Act 2000 (FSMA) should be amended so that authorised firms are no longer able to approve the financial promotions of unauthorised persons, unless the authorised firm had passed through a new regulatory ‘gateway’ operated by the FCA. In terms of the gateway HM Treasury set out two possible options being: (i) restrict approval of the financial promotions of unauthorised firms through the imposition of requirements by the FCA; and (ii) specify the approval of financial promotions communicated by unauthorised persons as a ‘regulated activity’ under FSMA. HM Treasury’s preferred option was the first option  on the basis that it would achieve the intended outcome of strengthening the FCA’s ability to ensure that authorised firms comply with FCA rules when approving the financial promotions of unauthorised persons, without fundamentally altering the overall regulatory architecture of the financial promotion regime.

In its response HM Treasury is proceeding with its preferred option for the gateway and sets out the proposed structure that includes a transitional period.

The proposed structure of the gateway includes:

• All new and existing authorised firms will be prohibited from approving the financial promotions of unauthorised persons. This will be implemented through the imposition of a requirement on their permission – the Financial Promotion Requirement.
• Both new and existing authorised firms that wish to approve financial promotions will have to apply to the FCA to have the prohibition removed either entirely (allowing them to approve all types of financial promotions), or partially (allowing them to approve certain types of financial promotions). Firms will do this using a variation of requirement application to the FCA. The FCA will determine, and accept or refuse, such an application under powers in Part 4A FSMA. The FCA will be able to refuse an application if this is deemed necessary in order to advance its operational objectives.
• Permissions to approve financial promotions could be limited to a specific type or types of products or services dependent on the firm’s expertise. The proposed gateway is not intended to require the FCA to grant permission on a promotion by promotion basis.
• Firms will be able to apply to the FCA at any point for their requirements to be varied further (either to increase the scope of their permission to approve financial promotions, or to reduce it).
• There will be a transitional period with three distinct phases: (i) before the transitional period commences, there will be an application window in which firms that wish to continue to approve financial promotions in the new regime will apply to do so; (ii) once the transitional period has begun firms that have applied to the FCA to be able to approve financial promotions by the end of the application window will be able to continue approving financial promotions during the transitional period until such time as their application is decided; and (iii) at the end of the transitional period, the new regime will commence and only those firms that have successfully applied to have the Financial Promotion Requirement cancelled or varied will be able to approve financial promotions.

In terms of next steps:

• The Government intends to bring forward legislation when parliamentary time allows.
• The FCA will consult on its proposals for implementing the gateway in due course.

(HM Treasury: Response to regulatory framework for approval of financial promotions, 22.06.2021)