FCA consultation on prospectus regime

The FCA has published its consultation (CP24/12) on the new prospectus rules, which will set out the detailed requirements of the new UK prospectus regime. The proposals will involve significant changes, particularly around when a prospectus is needed on a secondary capital raising, as well as making it easier for companies to make forward looking statements - and are broadly in line with the Secondary Capital Raising Review (see our blog post here for more details).

Reform of the prospectus regime was part of the recommendations made by the UK Listing Review. The Public Offers and Admissions to Trading Regulations 2024 (POATR), which were made by Parliament in January 2024, created the framework for a new public offers and admissions to trading regime in the UK.  The consultation published by the FCA on 26 July 2024 is on the rules that will contain the detailed requirements around when a prospectus is required and the content of any prospectus, and it follows a series of Engagement Papers published by the FCA last year on key areas of the new regime. The proposals aim to reduce the costs of listing on UK markets, make capital raising easier on UK listed markets and remove barriers to retail participation. They dovetail with the recent reforms of the listing regime, as set out in PS24/6 – see our blog post here for more detail.

Key points to note on the proposed new UK prospectus regime are:

• When a prospectus may be required – Prospectuses will remain a key feature of an IPO in the UK; in relation to further issuances of securities already admitted to trading on a regulated market, the threshold for triggering the requirement for a prospectus will be increased from 20% to 75%. This change would be made across asset classes, including non-equity and funds. Issuers will be able to produce a voluntary prospectus approved by the FCA for issuances below this threshold, recognising different needs of different issuers, including those with a more global shareholder base.
• Information in a prospectus – The overarching requirement for a prospectus to contain “necessary information” will be retained, and the FCA is consulting on the detailed disclosure requirements in this consultation. Proposals include that the contents for the summary be less prescriptive.
• Sustainability-related disclosures in prospectuses – Issuers seeking admission of equity securities to a regulated market will have to include certain climate-related disclosures where the issuer has identified climate-related risks as risk factors or climate-related opportunities as material to the issuer’s prospects.
• Forward looking statements – The statutory liability threshold for these statements will be amended so that the threshold for liability will be recklessness (rather than negligence). The FCA is proposing to provide a clear framework to give issuers legal certainty on what information can be deemed protected forward looking statements (PFLS) and to ensure investors can identify and assess such content.
• Six-day rule – The FCA is proposing that the six-day rule (which requires a public offer prospectus to be made available to the public at least six working days before the end of the offer) be reduced to three days.
• AIM – Where an issuer is seeking admission to a multilateral trading facility (MTF), the FCA can only require a prospectus where trading on the MTF is not intended to be limited only to qualified investors, i.e. where retail investors typically participate in the market. For these MTFs (referred to as primary MTFs), the FCA is proposing to require an MTF admission prospectus for all initial admissions to trading on such markets, and reverse takeovers (with exceptions for existing simplified routes to admission); and to set rules on certain rights and responsibility attaching to the production of an MTF admission prospectus.

The new rules will be set out in the new 'Prospectus Rules: Admission to Trading on a Regulated Market sourcebook' (PRM) and will replace the Prospectus Regulation Rules. 

Alongside this consultation paper, the FCA has also published CP24/13 on proposed rules for the new regulated activity of operating a public offer platform as a further feature of the new POATR framework. It also expects to undertake a follow up consultation later this year in relation to rules on low denomination retail bonds, certain transitional provisions, and minor changes to make the applications process for further issuances of securities more efficient.

The consultation closes on 18 October 2024.

For an overview of the FCA's proposals, see our snapshot here.