1-Hour Program

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Overview

September 27, 2016, 12:00 pm - 1:00 pm  (E..T.)

As of September 17, 2014, new European regulations came into effect which required that where transactions in transferable securities take place on a trading venue, the relevant securities should be settled electronically (recorded in book entry form) in a Central Securities Depositary on or before the intended settlement date.  This requirement applies to all transactions executed on the London Stock Exchange (the “Exchange”), including securities previously ineligible for electronic settlement.   

Regulation S grants a safe harbor from registration of securities with the Securities and Exchange Commission (the “SEC”) and is often used by issuers conducting offshore (i.e., outside of the United States) offerings.  Regulation S, Category 3, governs the sales of equity securities by U.S. issuers and certain non-U.S. issuers with “substantial U.S. market interest” under Regulation S, and such securities must comply with a one-year distribution compliance period to prevent securities placed outside the United States from flowing back into the United States following an offering.  To comply with the Regulation S distribution compliance period and the requirements for the applicable legends and purchaser certifications, Regulation S, Category 3 shares (“Category 3 Shares”) have historically traded on the Exchange in certificated (physical) form.  Therefore, previously, issuers of Category 3 Shares requested a derogation from the Exchange rules requiring electronic settlement, to allow their Category 3 Shares to settle in certificated form.  Paper settlement of the Category 3 Shares presented obvious practical difficulties and was cited as a major factor in the relatively low liquidity of Category 3 Shares in the secondary market.  

Due to the new European regulations introduced in September 2014, the Forum for U.S. Securities Lawyers in London (the “Forum”) worked with the Exchange and Euroclear UK and Ireland (“EUI”, as the owner and operator of CREST) to develop and implement a revised electronic trading and settlement system and related procedures to facilitate the electronic settlement of Category 3 Shares.  This included the use of a marker at the Exchange level, electronic legends and certain electronic purchaser certifications.  The electronic trading and settlement system and the related procedures were implemented on September 1, 2015.

Topics to be addressed include: 

  • Overview of Regulation S, Category 3;
  • The implementation of the electronic trading and settlement system and the related procedures;
  • Update on relevant transactions from the London Stock Exchange;
  • Current market practice; and
  • Practical suggestions for relevant transactions.  

Faculty: 

Umerah Akram, Head of ELITE, UK at the London Stock Exchange
Edward A. Bibko, Head of Capital Markets for EMEA at Baker & McKenzie LLP
Daniel K. Winterfeldt, Partner at Reed Smith LLP

Credit Details