Debt Capital Markets


Recent development

Continuing Turkey’s ongoing effort to harmonize its capital markets rules with international market standards, on March 23, 2016, the Turkish Capital Markets Board (the “CMB”) adopted a resolution recognizing that Takasbank’s central counterparty (“CCP”) activities comply with the Financial Market Infrastructure Principles (“FMIP”) of the Committee on Payment and Market Infrastructures of the International Organization of Securities Commissions (“CPMI – IOSCO”), and designating Takasbank as a “qualifying CCP” (a “QCCP”) under Turkish law. As a result, regulators and market participants will consider transactions routed through Takasbank as less risky for capital adequacy and own-funds purposes.

Issuers and their respective advisors can now no longer rely on a disclaimer for liability which is customarily included as part of any teaser document or information memorandum (IM) that is distributed in Malaysia to solicit interest of potential investors to invest in an auction sale of any equity or debt instrument. With effect from 15 September 2016, Section 256, read together with section 92A, of the Malaysian Capital Markets and Services Act 2007 now provides that any provision in a “document, agreement or contract” that excludes the liability of any person who provides information to another who is investing in a capital market product will be void.

The most noticeable development in the Gulf region has been the issuance of new commercial companies laws in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA), which prompted the market regulators in both these countries to issue new regulations to comply with the new laws.

The UAE new commercial companies law, which has been expected for at least 10 years, has come into force on 1 July 2015. It has brought some important new developments in relation to capital markets as it lowered the free float to 30% (versus 55% previously). It also introduced concepts such as of employee stock ownership plans, strategic shareholders, conversion of debts into shares, underwriters, bookbuilding, electronic subscription and others.

On 30 November 2015, the European Commission (EC) published a proposed new Prospectus Regulation (PD3) which will repeal and replace the existing Prospectus Directive and Prospectus Regulation.  PD3 is on a fast track and is an important step in building the Capital Markets Union. Once finalised, PD3 will enter into force 20 days after publication in the Official Journal and will take “direct effect” in Member States 12 months thereafter (probably late 2017 or early 2018).

PD3 is intended to solve various problems present in the current regime, including:

  • Prospectuses being unwieldy “liability management” tools with confusing summaries and numerous generic risk factors;
  • SMEs continuing to avoid the capital markets; and
  • Reduced liquidity and too few retail investors resulting from the large denominations encouraged by the public offer exemptions for EUR100,000 denominations and the wholesale disclosure regime.