Simplifying securities issuance: prospects for reform
The Bank of Russia has set out steps to further simplify the issuance of securities after discussing its report with market participants. The measures proposed will make it easier for companies to enter the capital market and decrease the associated costs.
A large set of changes will affect bond issuance. Seasoned issuers whose securities are already trading on the exchange and which comply with disclosure requirements will enjoy the most simplified procedures. The regulator proposes to exempt them from the need to draw up and register securities prospectuses – instead, they will only be required to publish the key terms of the securities on offer for investors. For debut issuers entering the debt market without listed shares, the existing admission rules will remain unchanged.
The amendments allow issuers to delegate the authority to make decisions on debt offerings (except for convertible bonds) to the director general, rather than to the board of directors. This decision will help streamline corporate processes and significantly accelerate securities issuance.
The Bank of Russia suggests transferring its functions to register structured bond issues with standard terms to exchanges if these securities are offered in the organised market and to depositories and registrars in the over-the-counter market. The regulator will only be in charge of registering issues with more complex, non-standard terms.
The second set of changes concerns the stock market. Non-public joint-stock companies with no more than 50 shareholders will no longer have to register share issues and will only be required to keep records of their securities with a registrar. In addition, the Bank of Russia plans to reduce the basic period for shareholders to exercise their preemptive rights to buy additional shares from 45 days to 15 business days. This will allow issuers to more flexibly and quickly respond to market conditions favourable for raising capital.