Topic : Capital Markets

In the Supervisory Impulses Package for the Security and Growth of the Capital Market, the Polish Financial Supervision Authority (KNF) announced relief for businesses regarding (among others) the offering documents processing. As promised, the “Anti-Crisis Shield,” adopted on March 31, 2020, amends applicable regulations regarding the obligation to submit an offering memorandum to KNF in the case of the so-called “rolling” offerings.

Based on the revision of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies of July 29, 2005 (Dz. U. / Journal of Laws of 2005 no. 184, item 1539, as amended) (the “Public Offering Act”), which was enacted on November 30, 2019, a public offering of securities addressed to fewer than 150 natural or legal persons per a Member State, qualified investors excluded, in the case of which the number of persons to whom it is addressed plus the number of persons to whom such public offerings of the same type of securities were made over the preceding 12 months exceeds 149, requires the publication of an offering memorandum, which needs KNF’s approval.

In other words, offerings made over a 12-month period are added together. If the number of addressees of such offerings exceeds 149, an offering memorandum regarding the offering, approved by KNF, must be published (the Public Offering Act provides for one exception – an offering addressed exclusively to the holders of same-type securities originating from the same issuer or to entities which received offerings of purchasing the issuer’s bonds as part of debt conversion following a purchase of other bonds of the same issuer created earlier.

In accordance with the act amending the Act on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them as well as amending selected other acts (Dz. U. / Journal of Laws of 2020, item 568), if the state of epidemic threat or the state of epidemic is announced, offering memoranda regarding this type of public offerings will not require KNF’s approval. The requirement is to be suspended until the state of epidemic threat or the state of epidemic is cancelled and a month thereafter.

This will significantly facilitate and expedite the procedure faced by the issuers seeking to raise capital by way of several offerings addressed to fewer than 150 persons (qualified investors excluded).

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Supervisory Impulses Package – Polish Financial Supervision Authority’s Office (PFSAO) proposes to ease regulatory burden and supervision amid coronavirus outbreak.

As the coronavirus epidemic spreads, the PFSAO works on a set of proposals to help entities supervised by the institution carry on under the present market conditions. The package has been named “Supervisory Impulses Package for the Security and Growth of the Capital Market” (SIP), with similar programs announced for the banking and insurance sectors.

The SIP for the capital market has the following goals:
– to keep market liquidity stable;
– to help entities fulfill regulatory obligations by rescheduling reporting deadlines;
– to help businesses raise capital;
– to allow businesses to focus on clients’ needs and key processes.

Actions that the PFSAO plans to take include:

1. Individual approach to investment funds which fail to comply with applicable investment limits, covering adjustment of supervisory measures to the present market conditions;

2. Creating or launching tools to boost liquidity in the treasury securities sector by implementing as well as supporting relevant measures;

3. Legislative changes, such as:
– extending deadlines for entities supervised by the PFSA to prepare, approve and publish annual financial statements and annual consolidated financial statements;
– extending deadlines for issuers to submit quarterly reports and consolidated quarterly reports covering the first quarter of the financial year which started on 1 January 2020;
– extending deadline for holding the Annual Shareholders Meeting;
– extending deadline salary policy approval;
– modification of rules for preparing information memoranda leading to easier and faster processing of bid documents, which businesses are required to submit in order to raise capital.

4. Pragmatic approach to selected supervisory actions, including:
– review of information submitted by the entities supervised by the PFSA in fulfillment of ongoing reporting obligations to lighten the burden on them; the need to postpone deadlines for fulfillment of these obligations is also expected;
– putting off non-reporting actions (e.g. audits, information obtaining);
– taking relevant supervisory actions in case of non-compliance with capital adequacy standards, with allowances being made for the epidemic’s impact;
– revision of the PFSA’s inspection schedule (verification of upcoming inspection actions), without modifying supervisory goals;
– pragmatic approach to delaying individual supervisory deadlines, e.g. deadlines for implementation of guidance issued after inspections, including deadlines established originally;
– simplified form of PFSAO’s supervisory assessments carried out in 2020, with allowances being made for the epidemic’s impact;
– six-month extension of the deadline for brokerage houses to adopt the EBA’s guidelines on outsourcing arrangements.

Moreover, the PFSUO will increase its reliance on electronic communication channels, esp. PORTAL and e-PUAP platforms, and e-mail, to keep in touch with entities it supervises.

The SIP is a work in progress, individual elements of which may or may not be implemented, depending on market developments. It remains to be seen how the initiatives will translate into law and supervisory practice. With the PFSU’s declarations of remaining open to suggestions and discussion with market participants about any initiatives to mitigate the epidemic’s impact on entities operating in the capital market, one may be optimistic.

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