Prospectus regime

CP24/12: Consultation on the new public offers and admission to trading regime

On 26 July 2024, as part of a package of measures designed to strengthen the UK’s capital markets and London’s position as a global financial centre, the FCA published CP24/12 consulting on its proposed new rules relating to the reform of the UK public offers and prospectus regime. For further information see our briefing FCA consultation on reform of the UK prospectus regime: Key takeaways for equity issuers. This is the latest step in the process of modernising the UK’s capital markets and follows on from the FCA’s recent changes to the listing regime (for further information on the listing reforms, see our briefing here).

As part of the same package of measures, the FCA also published a separate consultation on proposals for a new activity of operating a public offer platform which will offer an alternative route for companies to raise capital outside public 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.

The POATRs will be underpinned by detailed FCA rules and, as such, will not come into full effect until these have been finalised. The FCA is currently consulting on proposals for its rules in this area as discussed above.

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.¹
• 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 (such as the Main 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 – this would include, for example, AIM).
• 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 published CP24/13 setting out its proposals in this context.

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.² 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. See above in relation to the FCA’s July 2024 consultation on its proposals in this context.

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 (being those, including AIM, which are not restricted to qualified 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. See above in relation to the FCA’s July 2024 consultation on its proposals in this context.

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.

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

Although forward-looking information is of key importance to investors, it is recognised that liability concerns can currently deter issuers from including it in prospectuses. To address this, and encourage increased disclosure, 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. See above in relation to the FCA’s July 2024 consultation on its proposals in this context.

Next steps

The POATRs will only come into full effect once the FCA has made its underlying rules in various areas. In its July 2024 consultation (see further above) the FCA has indicated that it is aiming to finalise its new rules by the end of H1 2025, with a further period thereafter before they come into force. On that basis it seems unlikely that the new regime will come into effect before the autumn of 2025 at the earliest.

2023 FCA engagement papers: New regime for public offers and admissions to trading

In 2023 the FCA 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.

In July 2024 the FCA published a formal consultation on its proposed rules in these areas (see above).

Links to key consultations/responses etc.

2024

FCA CP23/12: Consultation on the new Public Offers and Admission to Trading Regulations regime (POATRs) (July 2024) – setting out the FCA’s proposals on its new rules under the regime

FCA CP24/13: New regime for public offer platforms (July 2024) – setting out the FCA’s proposals for a new activity of operating a public offer platform which, under the POATRs, will offer an alternative route for companies to raise capital outside public markets

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)