Prospectus regime
UK listing and capital raising portal: A revised regime for UK equity capital markets
Public Offers and Admissions to Trading Regulations 2024
The Public Offers and Admissions to Trading Regulations 2024 (2024/105) (POATRs), the regulations that create the new UK framework for offers of securities to the public and their admission to trading, were made at the end of January 2024. This followed on from the publication of earlier illustrative drafts and previous consultations by HMT.
Although the POATRs will only come into full effect1 once the FCA has made underlying rules, and as such the detail remains to be fleshed out in a number of areas, the overarching architecture of the new regime is now finalised.
Some of the key aspects of the regime outlined in the POATRs are summarised below, including the divergence in approach between public offers and admissions to trading.
Public offers
The POATRs will introduce a prohibition on making a public offer in the UK unless an exemption applies. Importantly:
- The prohibition under the POATRs applies to offers of “relevant securities” – this is wider than the current rules as it extends beyond transferable securities to also include offers of certain non-transferable debt securities.2
- If an offer does not fall within an exemption, it cannot be made – unlike the current regime, it will not be possible to cure the position by publishing a prospectus. As such, prospectuses will cease to be a feature of the UK public offers regime (although see below in relation to admissions to trading).
The exemptions to the public offer prohibition in the POATRs are largely derived from those under the existing UK Prospectus Regulation, including the “qualified investor” and “150 persons” exemptions. However, there are a number of changes and additions, including (amongst other things):
- Introducing a new exemption for offers of securities which are, or are offered conditional on being, admitted to a UK regulated market or “primary MTF” (in summary, an MTF which operates as a primary market and allows companies to issue new capital rather than only trade existing instruments).
- Introducing a new exemption for offers of equity securities made by UK incorporated companies to existing holders.
- Changing the threshold of the current €8m public offer exemption to £5m.
- Redrafting the exemption for public offers made in connection with takeovers.
- Introducing a new exemption for offers made through a public offer platform (POP) - this is intended to increase the capital raising options available to companies that are not admitted, or seeking admission, to a stock market. A new regulated activity will be created covering the operation of POPs and the FCA will have power to determine the detailed requirements that will apply to them, including the level of diligence and disclosure that must be complied with (the FCA has discussed its potential approach to making rules in this area in EP6 - see here).
Unless they are below a £1m threshold, all exempted offers will be subject to an “equality of information” requirement which (as currently) will essentially require material information provided to one investor to be provided to any other investors to whom the offer is addressed.
The Government has previously indicated that it intends to develop a new regime which would allow companies listed on certain designated overseas stock markets to offer their securities into the UK on the basis of documentation produced in accordance with their home rules.3 This aspect of the regime is not addressed in the POATRs, although in the illustrative policy note published in December 2022 HMT noted that it was continuing to consider the details of this regime.
Admission to trading
Regulated markets
Prospectuses will continue to be a feature of admission of transferable securities to trading on UK regulated markets.
The POATRs give the FCA power to make rules setting out when a prospectus will be required in this context, including in respect of secondary fundraisings post-IPO, and the exemptions that will apply. It has discussed its potential approach to making rules in this area in EP1, EP2 and EP4 – see here.
Primary MTFs
Under the new regime, prospectuses will also become a feature of admission to primary MTFs in certain cases in the form of “MTF admission prospectuses”.
Under the POATRs the FCA has power to require certain primary MTFs (those which are open to retail investors) to include in their rules an obligation for issuers to publish an MTF admission prospectus in specified circumstances. Primary MTFs can also choose to introduce such a requirement into their rules voluntarily.
This is not intended to change the current system in which MTFs establish their own admission criteria and rules – primary MTF operators will be responsible for setting the detailed contents requirements for MTF admission prospectuses and the process for their publication and validation. The POATRs also specifically prevent the FCA from requiring MTF admission prospectuses to be reviewed or approved by it.
The FCA has discussed its potential approach to making rules in relation to primary MTFs in EP6 - see here. Amongst other things, it notes that it is considering whether to require primary MTF operators that allow retail participation to require an MTF admission prospectus for initial admissions to trading but is not intending to require an MTF admission prospectus for further issues of securities of a class already admitted (other than potentially in the case of a reverse takeover that involves the admission to trading of newly issued securities).
Prospectus contents
Under the new regime, the detailed contents requirements for regulated market prospectuses will be set out in FCA rules and those for MTF admission prospectuses will be set out in the rules of the relevant MTF. However, in both cases the prospectus must also comply with the overarching “necessary information” test set out in the POATRs. This is largely the same as the test under the current rules, but it has been revised in certain areas (including to clarify that the necessary information may vary depending on whether the prospectus relates to an IPO or a secondary issue).
Forward-looking information in prospectuses
The POATRs will establish a different liability threshold (based on fraud and recklessness) for certain categories of forward-looking information in prospectuses, including MTF admission prospectuses - this is essentially aligned with the liability standard that currently applies to various other types of information published by issuers post-admission. Aside from this change, the existing negligence-based threshold for false, misleading or omitted information is retained.
The FCA will be responsible for specifying the categories of “protected forward-looking statements” (or PFLS) in prospectuses that will be within scope of the revised liability threshold and has discussed its potential approach to making rules in this area in EP3 - see here.
Next steps
The POATRs will only come into full effect once the FCA has made its underlying rules in various areas. As discussed above (and see also below), the FCA has issued a number of Engagement Papers in this context but draft rules are not expected to be published for consultation until summer 2024.
FCA engagement papers: New regime for public offers and admissions to trading
The FCA has published a number of engagement papers setting out its initial thinking on how (under the powers given to it under the POATRs – see above) it might write its rules in relation to the following aspects of the new UK prospectus regime:
- Admission to trading on a regulated market (EP1).
- Further issuances of equity on regulated markets (EP2).
- Protected forward-looking statements (EP3).
- Non-equity securities (EP4).
- Public offer platforms (EP5).
- Primary multilateral trading facilities (EP6).
For a brief summary of EP1 - 4 please see here and for a brief summary of EP5 and EP6 please see here. Any written responses to the engagement papers are requested by 29 September 2023.
Following the completion of its engagement process the FCA intends to work on developing specific rule proposals which it plans to consult on in 2024 (see also the FCA’s webpage on the new regime for public offers and admissions to trading).
Links to key consultations/responses etc.
2024
Public Offers and Admissions to Trading Regulations 2024 (2024/105) and Explanatory Memorandum (January 2024)
2023
FCA publishes Engagement feedback on the new public offers and admissions to trading regime
HMT publishes final draft Public Offers and Admissions to Trading Regulations 2023 and an associated explanatory memorandum
FCA publishes engagement papers setting out its initial thinking on how (under the new regime) it might write rules in relation to public offer platforms and primary multilateral trading facilities (July 2023)
HMT publishes near-final Public Offers and Admissions to Trading Regulations 2023 and associated policy note following on from the publication of earlier illustrative drafts in 2022 as part of the Edinburgh Reforms (July 2023)
FCA publishes engagement papers setting out its initial thinking on how (under the new regime) it might write rules in the following areas: admission to trading on a regulated market, further issuances of equity on regulated markets, protected forward-looking statements and non-equity securities (May 2023)
FCA publishes "new regime for public offers and admissions to trading" page in relation to its work/engagement on the new UK prospectus regime, including a calendar of events and publications (May 2023)
2022
HMT publishes (as part of the Edinburgh Reforms and in relation to reform of the UK’s regime for public offers and admission to trading) an illustrative draft of the Financial Services and Markets Act 2000 (Public Offers and Admissions to Trading) Regulations 2023 and associated illustrative policy note (December 2022)
UK Prospectus Regime Review: Review Outcome (March 2022)
2021
UK Prospectus Regime Review: Summary of Responses (December 2021)
UK Prospectus Regime Review: Consultation (July 2021)
UK Listing Review (Hill Review) (March 2021)
Footnotes
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