Treasury response on the UK Prospectus Review

The Treasury has published a response on the UK Prospectus Review, setting out its policy approach to reforming the UK’s prospectus regime, in the biggest shake up since 2005.

This follows the conclusions of the Hill Review of the UK listing regime published in March 2021. One of Lord Hill’s recommendations was an overhaul of the prospectus regime, in particular for further issuances by companies that are already listed. The Treasury published an initial consultation in July 2021 on fundamental reforms to the rules governing when a prospectus must be published, and what should be in a prospectus when an issuer is required to publish one (see our blog post here). It has now published its policy approach, stating its intention to proceed with the reforms broadly as proposed.

The key features of the policy approach are:

• IPOs and secondary issues – Prospectuses will remain a key feature of an IPO in the UK. The FCA will be given discretion to determine when a prospectus is required but, for a listed issuer, a public offer to its existing shareholders would not of itself require a prospectus.
• Prospectus contents – The overarching requirement for a prospectus to contain ‘necessary information’ will be retained, but the FCA will be given power to make rules on the detailed disclosure requirements, opening the door to a more proportionate disclosure regime, particularly for secondary issues (if a prospectus is required at all). The FCA will also have discretion to decide which types of prospectuses to review.
• Liability – Liability for forward-looking information in a prospectus will be aligned with liability for other listed company published information, so that liability is only incurred when those involved are reckless. In addition, it will no longer be a criminal offence to apply for admission to trading on a UK regulated market without an FCA-approved prospectus.

There are also reforms in relation to share offers by private companies and overseas companies.

The next step is for the Government to make the necessary legislative changes to the Financial Services and Markets Act 2000 to create the framework for the new regime when parliamentary time allows. The FCA will also need to consult on new rules, given its expanded responsibilities.

For more information, see our detailed briefing on the reform proposals, which has been updated to reflect the Treasury’s response.

The Hill Review made a series of other recommendations, alongside reform of the prospectus regime. Recent changes to the FCA rules around dual class share structures, free float and SPACs also stem from the Hill Review’s recommendations. We have updated our summary of the Hill Review recommendations, which sets out further information on the key proposals and progress in respect of them to date. The summary is available here.