Financial Conduct Authority Consults On Retail Distribution Restrictions Of Contingent Convertible Securities

Author:Shearman & Sterling LLP
Profession:Shearman & Sterling LLP
 
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On October 29, 2014, the UK's Financial Conduct Authority ("FCA") issued a consultation paper on restrictions on the retail distribution of regulatory capital instruments. The FCA put temporary rules in place restricting the retail distribution of contingent convertible securities ("CoCos") earlier this year, which came into force on October 1, 2014 for the period of a year. The FCA is now proposing permanent rules that would apply to all authorized firms in the UK, including issuers of CoCos, firms promoting or intermediating transactions in CoCos, as well as funds investing in CoCos. The new rules would prevent the distribution of complex, unusual or risky investments to retail consumers who are not sophisticated, high net worth or likely to be suitable for such investments. Retail distribution of CoCos would be prohibited, unless the prospective client meets certain defined criteria. The...

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