Global Financial Regulatory Blog

Latham Collaborates on the Lexology Getting the Deal Through 2023 Equity Derivatives Guide

Posted in Derivatives

The guide enables side-by-side comparison of critical equity derivatives issues across key jurisdictions.

By Rafal Gawlowski

The past several years emphasized the growing importance of strategic equity solutions as part of corporate finance advisory services for both listed issuers and their controlling shareholders. Strategic equity solutions include a range of equity derivatives products, such as capital-raising, equity-linked products; structured share buy-back and share accumulation and disposal products; and hedging and monetization products.

Interestingly, the pandemic highlighted the continued demand for sophisticated methods of capital raising, balance sheet management, and hedging solutions, all of which utilize strategic equity solutions. That trend continued until the 2022 downturn in global equity markets. The eighth edition of the Equity Derivatives volume in the Lexology Getting the Deal Through series aims to survey the equity derivatives landscape in key jurisdictions around the world and highlight the critical issues that practitioners and market participants should be aware of.

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European Commission Proposes Wide-Ranging Enhancements to Retail Investor Protection Rules

Posted in Markets and Investments, Retail Markets

As the “most ambitious legislative proposal since the inception of EU financial regulation”, the changes would make significant amendments to MiFID II and PRIIPs.

By Rob Moulton, Nicola Higgs, Becky Critchley, Gary Whitehead, and Charlotte Collins

On 24 May 2023, the European Commission (Commission) published a package of proposals to strengthen protections for retail investors within the European Union (EU) and place “consumers’ interests at the centre of retail investing”. The proposals significantly amend the protections afforded to retail clients under MiFID II, and also impact the institutional markets, as discussed below.

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Global Regulators React to Banking Sector Turbulence

Posted in Banking, Regulatory Reform

Following this spring’s shocks to the banking system, US, UK, and European regulators are considering whether existing regulatory and crisis management measures require reform and enhancement.

By David Berman, Nicola Higgs, Markus E. Krüger, Arthur S. Long, Rob Moulton, Axel Schiemann, Pia Naib, Ja Hyeon Park, Deric Behar, and Charlotte Collins

The spring of 2023 saw more dislocation in the global financial sector than any time since the 2008-09 financial crisis.

In the US, banking institutions with over $500 billion in total assets failed, and other banks that were publicly traded saw their share prices come under significant pressure, leading to intervention by the authorities. In Europe, Swiss regulators undertook similar measures.

The rapidity of these failures came as a surprise to both regulators and the general public. With instability not fully subsiding, US, UK, and European regulators have begun to consider how to calibrate their supervisory regimes in response.

In this report, Latham lawyers examine the measures being considered by regulators in these jurisdictions.

Read the report.

New Federal Exemption Changes the Registration Landscape for M&A Brokers

Posted in Securities Regulation

The narrower M&A broker exemption supersedes the 2014 M&A broker no-action letter while leaving state-level restrictions and foreign M&A broker relief unaffected.

By Marlon Q. Paz, Stephen P. Wink, Naim Culhaci, Donald Thompson, and Deric Behar

On March 29, 2023, the Securities Exchange Act of 1934 (Exchange Act) was amended to exempt certain “M&A brokers” from registration as broker-dealers with the US Securities and Exchange Commission (SEC). The amendment, Exchange Act Section 15(b)(13), signed into law on December 29, 2022, as part of the Consolidated Appropriations Act (H.R. 2617), largely codifies previously granted SEC Staff no-action relief, albeit with certain limitations. Like the prior no-action relief, the new legislation does not preempt state or territorial laws concerning broker-dealer registration.

Persons previously relying on the M&A broker no-action letter should carefully examine the new exemption and related existing state and foreign relief to determine what, if any, implications the new law poses with regard to continued reliance.

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European Commission Clarifies Aspects of SFDR With Additional Guidance

Posted in Environmental, Social and Governance (ESG)

The Commission has clarified requirements for financial product classifications and the definition of “sustainable investment” under the SFDR.

By Paul A. DaviesNicola HiggsMichael D. GreenAnne Mainwaring, and James Bee

In April 2023, the European Commission (Commission) published a series of answers to questions that the European Supervisory Agencies (ESAs) had raised in September 2022 on the legal interpretation of certain aspects of the Sustainable Finance Disclosure Regulation (SFDR). The answers seek to clarify outstanding questions from stakeholders, including in relation to the definition of “sustainable investment” under the SFDR. Previous uncertainty with respect to this definition contributed to considerable market movement in the form of product re-classifications in the latter half of 2022.

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FCA Commences Dialogue on Prospectus Reforms

Posted in Capital Markets, Regulatory Reform

FCA takes an innovative approach to obtain feedback from industry and stakeholder groups.

By Chris Horton, James Inness, Anna Ngo, and Johannes Poon

In May 2023, the FCA launched a process of engagement and dialogue on how the UK’s future prospectus regime could operate. The FCA’s first thematic engagement papers, published on 18 May, aim to solicit discussion and feedback on: (i) whether or how to set prospectus requirements for issuers seeking admission to trading on UK regulated markets; (ii) whether or how to set prospectus requirements for issuers raising further capital; and (iii) how forward-looking information should be covered in prospectuses.

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FCA Consumer Duty Update: Assessing Fair Value

Posted in Conduct of Business, Regulatory Reform

The FCA has published the findings from its review of firms’ fair value assessment frameworks and set out implementation priorities for firms.

By David Berman, Nicola Higgs, Rob Moulton, Becky Critchley, and Charlotte Collins

On 10 May 2023, the FCA published a speech by Sheldon Mills, FCA Executive Director, Consumers and Competition, on the countdown to the Consumer Duty implementation deadline of 31 July 2023. Alongside the speech, the FCA published the findings from its review of 14 firms’ fair value assessment frameworks under the Consumer Duty.

While the FCA’s review found that firms had considered the requirements carefully, it is concerned that some firms’ frameworks may not be effective in practice. Firms in the final stages of their implementation projects will want to ensure they take the FCA’s messaging, and findings from its review, on board.

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FCA Proposes Radical Reforms to Encourage UK Listings: 60-Second Read

Posted in Capital Markets

Proposals dramatically reduce the regulatory burden on listed companies.

By James Inness, Anna Ngo, and Johannes Poon

On 3 May 2023, the FCA published a consultation paper CP23/10 which sets out a blueprint for changes to the UK listing regime. The key reform proposed is that the existing premium and standard listing segments would be replaced with a single segment for commercial companies.

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UK Announces Updates to Green Finance Strategy

Posted in Environmental, Social and Governance (ESG)

The government published a new document outlining its existing and proposed objectives to develop the UK’s sustainable economy.

By Paul A. DaviesMichael D. Green, and James Bee

On 30 March 2023, the UK government published an updated version of its Green Finance Strategy (the Strategy), titled “Mobilising Green Investment”. The Strategy is part of the UK government’s series of announcements for its Green Day (see this blog post for more on the broader Green Day announcements).

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Hong Kong Moves Forward With Major Update to Capital Regime for Insurance Companies

Posted in Capital and Liquidity

Insurance Ordinance amendments would create a risk-based capital regime aligned with international standards.

By Simon Hawkins and Adrian Fong

On 6 April 2023, the Hong Kong government introduced the Insurance (Amendment) Bill 2023 into the Legislative Council to amend the Insurance Ordinance (Cap. 41, Laws of Hong Kong) (IO) and implement a risk-based capital (RBC) regime for insurers in Hong Kong.

Hong Kong long-term and general business insurers are subject to a rule-based capital adequacy regime, meaning that an insurer’s capital adequacy is based on its solvency margin (which is linked to the amount of premium income or level of insurance liabilities). The existing regime does not take into account factors related to the business and risk management practices of an individual insurer, such as the products offered or the investments made. The prescribed rules on asset and liability valuation also lack consistency in certain areas.

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