UK Government consultation on proposed power to block registrations on national security grounds – Government, public sector


Key points

  • The proposed power would allow the UK government to block initial listings and admissions of shares on UK public markets for reasons of national security.
  • The listing of debt securities (other than convertible securities) would not fall within the scope of the power.
  • Proposals may include adopting additional disclosure requirements for issuers as part of a national security screening process.
  • Consultation is open until August 27, 2021. Comments on proposals can be submitted to HM Treasury – contact details are provided in the consultation document and at the end of this alert.

On June 7, 2021, the UK Government’s HM Treasury published a consultation setting out the intended scope of a precautionary power to block initial listings and admissions of shares on UK public markets for reasons of national security (the “Consultation”). The consultation provides details on the types of listings that would fall within the scope of the proposed authority, as well as the information requirements that would be required as part of the national security screening of potential issuers.


In the 2019 economic crime plan, the UK government announced plans to investigate concerns about possible links between listing and national security, and the need for power to be able to block listings for reasons of national security. The government had initially declared its intention to introduce such a power in November 2020. It indicated that, based on the findings of HM Treasury, there are possible scenarios, albeit rare, in which the listing of a company on the UK could build the capacity of a hostile society. actors and ultimately harm national security.

An example of such a scenario (provided in the Consultation) where the government may find it appropriate to use the blocking power includes:

(a) An energy and technology company seeking to be listed in the UK.

(b) When the company is based in a country that has recently been the subject of UN sanctions for a nuclear program.

(c) When the company is partly owned by the Minister of Energy of that country.

d) The proceeds of registration would be used to advance the country’s nuclear weapons program.

The Financial Conduct Authority (FCA), a regulator independent of government, is currently able to block listings in certain circumstances, including where the admission of securities would be detrimental to the interests of investors. Although the concept of “investor harm” is not defined in the FCA’s listing rules, the government does not consider the investor harm power to be “an appropriate or effective mechanism to deal with risk of loss. national security ”. The government further notes in the consultation that investor interests and security interests may not always match and therefore it would not be appropriate for the FCA to conduct the national security risk assessment as part of the proposed power to block registrations.

The proposals contrast with other recent government statements on the UK listing regime, such as Lord Hill’s UK Listing Review, which focused on streamlining the listing process and increasing flexibility for stock issuers. potential to attract high quality growth companies to the London markets.

The government has the power under the Anti-Money Laundering Sanctions and Anti-Money Laundering Act 2018 (SAMLA) to impose a range of financial sanctions that, in practice, would have the effect of preventing certain UK enrollment applications. However, the government considers that an additional autonomous power to block a listing is necessary in circumstances where a company does not fall under an existing sanctions regime, but where it was nonetheless in the interest of safety. national to block listing.

Perhaps the most telling example of why the government is considering introducing new measures concerns the listing on the London Stock Exchange (LSE) of the En + (En +) group, a company controlled by Oleg Deripaska, in 2017. En +, in turn, held a majority stake in Rusal, a major Russian aluminum company. In addition, VTB Capital and Gazprombank, both subject to sanctions since 2014, were also involved in the listing.

A select Treasury committee then determined that the En + listing had taken place “due to a weakness in the sanctions policy” and that it would therefore be appropriate to introduce new specific measures to allow the blocking of a listing. for reasons of national security. Further, the Committee recognized that it would not be reasonable to expect the FCA to identify and block potential threats to national security on its own, without an established channel between it and national security experts. of the government.


The government intends the power to be broad in scope, applying to all initial listings and admissions of shares on UK public markets, including those involving shares, securities representing shares, such as global certificates of deposit and convertible securities. The proposals currently do not contemplate seizing non-convertible debt securities, but the Consultation is seeking the views of respondents on this exclusion. As the example given above cites the possibility that the proceeds of the offer could be used in a manner prejudicial to the national security of the United Kingdom, it is possible that the scope of this power could be extended to debt securities to the future.

The power would be applicable with respect to initial public offerings, including with respect to non-traditional structures such as direct listings and Special Purpose Acquisition Companies (SPAC), and would be relevant to both markets regulated (such as the main LSE market) and multilateral markets. trading platforms (MTF) that allow primary stock quotes (such as AIM).

The power would not extend to delisting companies that are already listed on UK public markets.

Disclosure requirements

The government is considering adopting an approach requiring accurate information to be provided by potential issuers as part of a national security screening process. These disclosures would include the following:

  • Basic information about the issuer.
  • An overview of the company, details about its group and a description of the markets in which it is present.
  • Details regarding the management of the business, including previous convictions for fraudulent offenses, official public incriminations or sanctions.
  • Details of major shareholders, including nature of control and measures to ensure control is not abused.
  • The reasons for the offer, including a breakdown of the product for each intended primary use, listed in order of priority.

The Consultation acknowledges that this information would not in itself create a significant additional burden for issuers as it would generally already be provided as part of the existing listing process, in particular where a prospectus is required, as it would be. the case for any LSE share on the main market. SEO. They would also likely have a minimal effect on issuers eligible for a prospectus exemption (as is generally the case for applications for admission to trading on an MTF such as AIM) given the routine disclosures made in the process. of the listing or admission process.

But the context in which the disclosures would be made would be different and, in this sense, a new barrier to listing would be created for certain types of issuers. In particular, issuers who disclose information about ultimate beneficial ownership and control (and how such control might be abused) will need to consider how the government views these matters in the context of other regulatory regimes. , in particular with regard to financial sanctions.

The Consultation raises questions as to the potential additional burdens that such disclosures may cause, particularly in circumstances where a prospectus is not produced. Potential issuers may also have concerns about when to disclose and how best to incorporate it into the listing process. The Consultation is seeking advice on, among other things, the potential of a “pre-authorization” option, under which potential applicants for listing could engage with the government upfront to eliminate any security objections. national before seriously initiating the registration process. It seems likely that the responses to the consultation will foster this possibility and it could be part of the early registration process for some applicants, especially those operating in strategic industries with strong ties to sovereign states.

Comments on proposals can be sent to HM Treasury by email at [email protected], or by mail to HM Treasury – Securities and Markets, Primary Markets and Competitiveness – Power Listings, 1 Horse Guards Road, SW1A 2HQ. The Consultation will close on August 27, 2021.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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