HM Treasury: Financial promotion exemptions for high net worth individuals and sophisticated investors - Consultation
On December 15, 2021 HM Treasury published a consultation paper following a review of certain exemptions from the financial promotion restriction in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO). These exemptions have not been reviewed for a considerable period and some have been misused, for example, to market inappropriate products to ordinary retail investors. The aim of the consultation is to retain the exemptions but to update them to reflect current circumstances and to address the risk of the exemptions being misused.
The consultation considers three specific exemptions, those for:
- Certified high net worth individuals (Article 48 of the FPO);
- Sophisticated investors (Article 50); and
- Self-certified sophisticated investors (Article 50A).
In the consultation paper, the Government does the following:
- Sets out why the financial promotion exemptions were introduced and how the current exemptions regime operates (see Chapter 2);
- Explains its understanding of the issues with the financial promotion regime (Chapter 3);
- Outlines five proposals for how the exemptions could be updated (Chapter 4). These are:
- Increasing the financial thresholds for high net worth individuals;
- Amending the criteria for self-certified sophisticated investors;
- Placing a greater degree of responsibility on firms to ensure individuals meet the criteria to be deemed high net worth or sophisticated;
- Updating the high net worth individual and self-certified sophisticated investor statements;
- Updating the name of the high net worth individual exemption.
The Government notes that it is minded, at this stage, to move forward with all five proposals. However, the proposals are independent of each other and, subject to the responses to the consultation, the Government may decide not to proceed with one or more of them.
Responses to the consultation are requested by March 9, 2022.
(HM Treasury, Financial promotion exemptions for high net worth individuals and sophisticated investors – Consultation, 15.12.2021)
HM Treasury: Consultation on proposal to block listings on national security grounds – Summary of responses
On December 10, 2021 HM Treasury published a summary of the responses it received to a consultation paper published on June 7, 2021 that proposed a power to block listings on national security grounds. This was an initial consultation touching on the scope of, and the nature of the disclosures required as part of, the proposed power to block listings on national security grounds.
HM Treasury has summarised the responses as follows:
- Overall, respondents were supportive of the Government’s objectives to take a power to block listings on national security grounds, to the extent that it is implemented in a way that does not disproportionately impact the attractiveness of UK capital markets. They highlighted the importance of having a narrowly targeted, precautionary power that does not impede on the role of the FCA, with clear safeguards.
- Respondents agreed with the intended scope but stressed the importance of producing clear and comprehensive guidance, and highlighted the importance of thorough engagement with stakeholders when producing the guidance around the detailed implementation of the power.
- Respondents agreed with the proposed exclusion of debt securities from the scope of the power. Respondents broadly agreed that including debt securities would have a disproportionately detrimental impact on the ability of companies and governments to raise capital quickly, as well as on the attractiveness of the UK's capital markets.
- Respondents agreed that the list of disclosures outlined was proportionate and reasonable, as it was standard market practice to require this information as part of the listing or admission process.
- Respondents did not anticipate that, when a prospectus is not produced, the disclosures would create a disproportionate burden for SMEs, as the information is likely to be included in the admission documents.
- There was general support for the proposed pre-clearance process. However, respondents emphasised the importance of getting clarity early in the process. Respondents agreed it would be most appropriate for the disclosures to be submitted before the issuer or other stakeholders incur significant costs.
In terms of next steps, HM Treasury notes that the policy will require legislation to be enacted. However, more policy development is needed before that is possible and HM Treasury will continue to develop the necessary power taking full account of the responses to the consultation, including further formal consultation as appropriate.
(HM Treasury, Consultation on proposal to block listings on national security grounds – Summary of responses, 10.12.2021)
HM Treasury: Consultation on UK Prospectus Regime Review – Summary of responses
On December 16, 2021 HM Treasury published a summary of the responses it received to a consultation paper published on July 1, 2021 that proposed a number of reforms to the UK’s prospectus regime following recommendations made by Lord Hill’s Listings Review. This review sits alongside the Government’s broader reform agenda in response to Lord Hill’s UK Listings Review recommendations. Other work includes the UK Secondary Capital Raising Review, launched in October 2021, which is looking into improving further capital raising processes for publicly traded companies in the UK.
The Government reports that there was extensive support across the sector for the proposals made in the consultation paper and the Government will set out its intended next steps in due course.
(HM Treasury, Consultation on UK Prospectus Regime Review, 16.12.2021)
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 receives Royal Assent
On December 15, 2021 the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (2021 Act) received Royal Assent. Among other things, this amends the Company Directors Disqualification Act 1986 (CDDA) to give the Secretary of State and the official receiver additional powers to tackle unfit directors who dissolve companies to avoid paying their liabilities, including liability to repay Government backed loans put in place to support businesses during the Coronavirus pandemic.
Among other things, section 2 of the 2021 Act amends the following sections of the CDDA:
- Section 6 (Duty of court to disqualify unfit directors of insolvent companies): the amendment to section 6 increases its scope to include former directors of dissolved companies, in particular, so that if the court is satisfied on application that the person was a director of an insolvent company, or a former director of a company which was dissolved without becoming insolvent, and their conduct as such a director makes them unfit to be concerned in the management of a company, it must make a disqualification order.
- Section 7(2) (Disqualification orders under section 6: applications and acceptance of undertakings): this amendment means that an application for a disqualification order by the Secretary of State in respect of a former director of a dissolved company may not be made three years after dissolution; and section 7(4) is amended so that the Secretary of State or official receiver may require any person to provide information relating to the conduct of a former director of a dissolved company which has not become insolvent, as reasonably required.
- Section 8ZB(2) is amended so that where a disqualification application is made by the Secretary of State under section 8ZA (Order disqualifying person instructing unfit director of insolvent company) in circumstances where the person influenced the actions of a disqualified former director of a dissolved company which has not become insolvent, the application must be made within three years of dissolution.Section 2(14) of the 2021 Act also makes clear that conduct which may be investigated and considered includes conduct in companies dissolved prior to commencement of the 2021 Act, and which occurred in companies not dissolved at that time.
- Section 15A (Compensation orders and undertakings) is amended so that compensation may be sought where a former director of a dissolved company has caused losses to creditors
Section 2(14) of the 2021 Act also makes clear that conduct which may be investigated and considered includes conduct in companies dissolved prior to commencement of the 2021 Act, and which occurred in companies not dissolved at that time.
Section 2 will come into force two months after Royal Assent, other than the amendments to section 7(4) which came into force on Royal Assent.
(BEIS, Crackdown on directors who dissolve companies to evade debts, 16.12.2021)