Reform of the UK prospectus regime – update on securities litigation risk

HM Treasury (HMT) has published a response setting out its policy approach to reforming the UK’s prospectus regime, in the biggest shake up since 2005. The response follows the initial consultation published in July 2021.

HMT's intention is to proceed with the reforms broadly as proposed in its initial consultation. The next step is for HMT to make the necessary legislative changes to the Financial Services and Markets Act 2000 (FSMA), to create the framework for the new regime when parliamentary time allows.

The idea behind these changes is to simplify regulation in this area, as well as facilitating wider participation in the ownership of public companies and improving the quality of information investors receive. As part of this, HMT will delegate a greater degree of responsibility to the Financial Conduct Authority (FCA) to set out the detail of the new regime through rules. The full suite of reforms will take effect after the FCA has consulted on, and is ready to implement, new rules under its expanded responsibilities. HMT is keen to return responsibility for designing and implementing financial services regulatory requirements to regulators. For more information on the reforms themselves, please see this detailed briefing produced by our Capital Markets team.

From a securities litigation perspective, in light of the ever-evolving statutory and regulatory landscape, it is important issuers continue to monitor the impact of any changes to their disclosure requirements. HMT's reforms of the UK's prospectus regime are likely to have a potential impact on claims under s.90 FSMA for liability for prospectuses and listing particulars. For more information on this impact, please see our previous blog post: HMT reform of prospectus regime: the potential impact on securities litigation.