Finance and Capital Markets

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

The timetable sets out three tranches of extensive regulatory changes to UK and EU law in 2023 and 2024.

By Rob Moulton, Becky Critchley, Denisa Odendaal, and Dianne Bell

The “Edinburgh Reforms”, a series of announcements made on 9 December 2022 by the Chancellor of the Exchequer (see here), set out the UK government’s reforms to drive growth and competitiveness in the financial services sector. The Reforms build upon the reform agenda that the government is taking forward through the Financial Services and Markets (FSM) Bill and which implements the Future Regulatory Framework Review.

The FCA stated that the perpetrator’s character is key to non-financial misconduct investigations, which suggests a mismatch with recent case law.

By David Berman, Nicola Higgs, Jon Holland, Andrea Monks, Rob Moulton, and Nell Perks

In last year’s Frensham[1]case, the Upper Tribunal considered how relevant a (non-dishonesty-based) criminal offence committed in one’s personal life is to the perpetrator’s regulatory “fitness and propriety”. The Upper Tribunal effectively reined in the FCA from too readily linking (i.e., considering as relevant) non-work-related misconduct to the perpetrator’s regulatory fitness and propriety to perform a regulated function. In doing so, the Upper Tribunal set out the approach to be taken when determining the relevance of non-financial misconduct in a regulatory context.

This Latham Client Alert highlights the difficulty in reconciling the FCA’s newly published ban of Mr Zahedian with the Upper Tribunal’s findings in Frensham. On the basis of the published Zahedian Final Notice[2], it is difficult to understand how (or even whether) the FCA followed and applied the approach laid down by the Upper Tribunal in Frensham. Indeed, Mr Zahedian may have felt somewhat aggrieved if he had read the Frensham judgment.

The Financial Services Skills Commission has issued an insight paper outlining how companies can collect and evaluate data on employees’ socioeconomic backgrounds.

By David Berman, Nicola Higgs, Rob Moulton, and Dianne Bell

Socioeconomic backgrounds of employees and socioeconomic diversity at senior levels across the UK financial services industry is beginning to feature more prominently in diversity and inclusion (D&I) discussions. Several government and industry taskforces and studies conducted on the issue of social mobility and class advantages/disadvantages have revealed striking impacts of this bias within the UK financial services sector. Not only is the sector significantly reliant on individuals from higher socioeconomic backgrounds at the leadership level, but the studies also indicate that employees from working class or lower socioeconomic backgrounds are held back in a number of ways (which may lead to their eventual departure from the sector).

  • Progression gap: Employees from working class or lower socioeconomic backgrounds progress 25% slower than peers despite no difference in job performance, and they find conforming to the dominant cultures “exhausting” and this impacts on their individual performances.
  • Pay gap: A class pay gap of £17,500 appears to exist in financial services (compared with £5,000 in the technology sector).
  • Opportunities to upskill talent: Findings suggest that individuals from lower socioeconomic backgrounds are less likely to sign up for training opportunities.

From a regulatory perspective, this lack of diversity at the senior level impacts the culture of a firm, raising concerns around, for example, groupthink and its impacts on effective decision-making.

A reminder of the ongoing reforms to implement recommendations from the Lord Hill and Kalifa Reviews.

By James Inness, Anna Ngo, and Johannes Poon

The outcome of the UK Secondary Capital Raising Review, launched on 12 October 2021 to improve further capital raising processes for UK publicly traded companies, was published by HM Treasury on 19 July 2022. (For further details, please see this Latham blog post).

Below is a recap on the other key developments on reforming the UK capital markets following the Lord Hill and Kalifa Reviews.

The landmark UK Secondary Capital Raising Review Report takes a holistic approach in making bold and comprehensive recommendations to improve the UK secondary capital raising processes and ecosystem.

By James Inness, Anna Ngo, Ryan Benedict, and Johannes Poon

On 19 July 2022, HM Treasury published the UK Secondary Capital Raising Review Report (the Report) that sets out a series of recommendations to improve further capital raising processes for publicly listed companies in the UK.

The regulator continues its Primary Markets Effectiveness Review to promote the competitiveness of a UK listing.

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

On 26 May 2022, the FCA published a discussion paper (DP22/2) to seek further views on how to make the UK listing regime more effective, easier to understand, and more competitive. This paper contains suggested reforms from the FCA to elicit feedback, rather than a formal consultation on proposed rule changes.