UK Prospectus Regime Changes

The UK Prospectus Regime Review Outcome outlines that the UK Government will replace the current regime contained in the UK Prospectus Regulation and will legislate to do so when parliamentary time allows. The changes will look to improve access to and the competitiveness of UK capital markets, taking advantage of the new freedoms in financial services following the UK’s withdrawal from the EU. 

One year on from the publication of Lord Hill’s UK Listings Review ¹ , the outcome document sets out a number of policy changes that the UK Government will take, following the Prospectus Regime Review consultation ². Lord Hill was a strong advocate for a fundamental overhaul of the regime, emphasising the need to remove duplication and complexity, encouraging broader participation, and enabling modernisation of the regulation the companies are subject to. The changes to the regime will simplify existing limbs of the UK Prospectus Regulation, separating the regulation of public offers of securities from the regulation of admissions of securities to trading and delegating responsibility for designing and implementing financial services regulatory requirements to the FCA. 

Admission to Trading

The concept of the prospectus will be retained as an important part of the regulation of securities admitted to trading on Regulated Markets, but the Government intends to give the FCA enhanced rule-making responsibilities in this area. The FCA will specify in its rulebook:

• if, and when, a prospectus is required, including for a further issuance by an existing listed issuer and for a secondary listing;
  
  
•  prospectus disclosure requirements; 
  
  
• the manner and timing of publication; 
  
  
• whether an overseas prospectus can be relied upon; and
  
  
• whether, and in what circumstances, a prospectus must be reviewed and approved by it prior to publication. 

The UK Government will also remove the criminal offence which currently prohibits requesting admission to trading on a UK regulated market without first having published an FCA-approved prospectus. 

Public Offers of Securities

While the FCA will require a prospectus for admission to trading on regulated markets, prospectuses will not be required for public offerings. Under the new regime, there will be a general prohibition on public offerings of securities subject to exemptions. These exemptions will derive from Article 1(4) of the existing UK Prospectus Regulation, but will be expanded to cover: 

• offers of securities that are, or will be, admitted to UK regulated markets;
  
  
• pro-rata offers of securities to those who already hold equity securities in the issuer;
  
  
• offers of securities that are or will be admitted to trading on certain multilateral trading facilities (MTFs) such as AIM (see further below);
  
  
• offers of securities made by private companies through a platform operated by a firm specifically authorised for the purpose (see further below); and 
  
  
• offers of securities made by companies that have prepared documents according to the rules of a relevant overseas jurisdiction and market. 

Existing exemptions relating to offers to ‘Qualified Investors’, offers to fewer than 150 persons and offers under employee share schemes will be retained. 

All thresholds in Euros will be re-stated into sterling at a one for one basis. However, the UK Government intends to change the current €100,000 threshold in the Article 1(4)(c) exemption for offers of wholesale non-equity securities to £50,000 to minimise any disruption to UK institutional investor access to international wholesale bond markets. 

Facilitating Forward-Looking Information

• that person knew the statement to be untrue or misleading;
   
• that person was reckless as to whether it was untrue or misleading; or
  
  
• in the case of an omission, if that person knew the omission to be a dishonest concealment of a material fact.

Forward looking information disclosures must be explicitly identified in the prospectus, and the FCA will be given responsibility for specifying the categories of forward-looking information to which the new liability threshold will or will not apply. 

AIM

The UK Government intends to add to the list of exemptions from the requirement to produce a prospectus, offers of securities which are or will be admitted to trading on certain MTFs, such as AIM.  Instead, the Government intends to develop a mechanism by which admission documents published in accordance with the rules of the relevant MTF, will be treated as a type of prospectus. MTFs will continue to establish admission criteria and rules for the facilities they run, subject to FCA rules and oversight. 

Private Companies

To increase the capital raising options available to private companies, the UK Government will remove the current requirement for an FCA-approved prospectus for offers over €8 million in any 12 month period. Instead, securities will be allowed to be offered to the public provided that the offer is made through a platform operated by a firm specifically authorised for the purpose.   In connection with this, the government intends to create a new regulated activity covering the operation of an electronic platform for the public offering of securities, such as an equity crowdfunding platform.   It will be up to the FCA to determine the detailed requirements that such platforms will be subject to, including the levels of due diligence and disclosure required. The threshold below which offers of securities from private companies will be exempt from the prohibition on public offers is still under consideration. Overseas private companies will not be excluded from offering securities to the UK public, subject to regulation. 

_{¹‘UK Listing Review’, Lord Hill of Oareford CBE, March 2021. https://www.gov.uk/government/publications/uk-listings-review}

_{²‘UK Prospectus Regime Review: A Consultation’, HM Treasury, July 2021. https://www.gov.uk/government/consultations/uk-prospectus-regime-a-consultation}