Finance and Capital Markets

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A new publication from the UK’s financial regulator signals to firms that they should take steps to manage risks in the use of AI.

By Stuart Davis, Fiona M. Maclean, Gabriel Lakeman, and Imaan Nazir

The UK’s Financial Conduct Authority (FCA) has published its latest board minutes highlighting its increasing focus on artificial intelligence (AI), in which it “raised the question of how one could ‘foresee harm’ (under the new Consumer Duty), and also give customers appropriate disclosure, in the context of the operation of AI”. This publication indicates that AI continues to be a key area of attention within the FCA. It also demonstrates that the FCA believes its existing powers and rules already impose substantive requirements on regulated firms considering deploying AI in their services.

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The FCA reveals its initial thinking on the regulatory framework for primary multilateral trading facilities and public offer platforms.

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

On 13 July 2023, the FCA published its fifth and sixth engagement papers to solicit discussion and feedback on the regulation of public offer platforms and primary multilateral trading facilities (MTFs) under the new regime for public offers and admissions to trading.

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The Court held that banks do not owe this duty to customers deceived into instructing their banks to transfer money to fraudsters.

By Nell Perks and Callum Rodgers

On 12 July 2023, the UK Supreme Court handed down its highly anticipated judgment in Philipp v. Barclays Bank UK PLC [2023] UKSC 25, allowing the appeal brought by Barclays Bank UK PLC (Barclays).

The Court’s decision, which resolved longstanding questions about the nature of the Quincecare duty, clarified that the Quincecare duty only arises in cases in which there is fraud by an agent acting for the customer. As a result, it cannot apply in circumstances in which the relevant payment was authorised by the bank’s customer directly, so it has no application in APP fraud cases. The Court overturned the decision of the Court of Appeal, which had expressly held that that it is “at least possible in principle” that the Quincecare duty could apply to a “victim of APP fraud” on the basis that the Quincecare duty “does not depend on the fact that the bank is instructed by an agent of the customer of the bank”. [1]

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.

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.

The Reform will extend tenors and reduce borrowers’ fees to encourage commercial bank lending into energy transition projects.

By Tom Bartlett, JP Sweny, Alexander Buckeridge-Hocking, and Samuel Burleton

The Organisation for Economic Co-operation and Development (OECD) has agreed a landmark deal to modernise the Arrangement on Officially Supported Export Credits (the OECD Arrangement), which is a welcome update for commercial banks, borrowers, and export credit agencies (ECAs) alike.

After several years of negotiation, the participants (Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom, and the United States) reached an agreement on 31 March 2023, to provide incentives and more favourable terms for financing energy transition projects.

In this article, we summarise the main changes to the OECD Arrangement and how they will benefit project financings and the wider energy transition.

With the recent UK “Green Day” announcements confirming the government’s support for CCUS, interest in UK CCUS projects is expected to continue to grow. While there are significant opportunities for investors, careful consideration will be needed to navigate a number of industry specific issues to achieve a successful CCUS project.

By Beatrice Lo, JP Sweny, Simon J. Tysoe, Evelyne Girio, James Richards, and Alexander Leighton

As governments and businesses around the world have committed to decarbonisation and achieving net zero by 2050, there has been growing activity in the development of, and investment in, carbon capture, usage and storage (CCUS) technologies. As the UK has one of the greatest carbon dioxide storage potentials of any country in the world (the UK Continental Shelf in the North Sea, accounting for approximately 85% of Europe’s carbon dioxide storage potential and able to safely store 78 billion tonnes), CCUS is a key focus for the government’s decarbonisation ambitions.

FCA chief executive’s speech indicates an exciting transition to a lighter regime and a true single listing segment.

By James Inness, Anna Ngo, and Johannes Poon

On 29 March 2023, FCA Chief Executive Nikhil Rathi delivered a speech at the Global Investment Management Summit on the topic “Reforming our capital markets ecosystem”.

He announced that the FCA will soon publish a blueprint for further reform of the UK listing regime in which the current standard and premium listing segments for shares in commercial companies would be replaced with a single listing category with a single set of requirements.

A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.

By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell

On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.

The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.

A new Latham & Watkins guide examines the recent increase in whistleblowing and poses self-assessment questions against which firms can benchmark themselves.

By David Berman, Andrea Monks, Nell Perks, Nathan H. Seltzer, Becky Critchley, and Charlie Bowden

Many sectors, including financial services, have encountered a discernible increase in whistleblows in recent times — a trend that shows no signs of abating. Indeed, some whistleblowers have seen fit to publicise their concerns in the press and/or…