UK equity capital markets – the FCA's new prospectus rules for admissions to UK public markets

Background

• Once in force, the POATRs will create a new framework consisting of a general prohibition on offering transferable securities to the public in the UK, subject to specific exemptions.
• The scope of the new regime will also extend to certain non-transferable debt securities such as mini-bonds.
• Key exemptions that are currently available will continue to apply, such as offers to qualified investors (e.g., institutional investors) and fewer than 150 other persons, and offers to directors and employees, among others.
• There will also be new exemptions, including for offers of unquoted equity securities to existing shareholders and offers of unquoted securities made on an FCA-regulated ‘public offer platform’ (an electronic platform whose operator is authorised by the FCA to carry on this new regulated activity). Alongside its new prospectus rules, the FCA has issued the final form of its rules for firms authorised to operate these platforms.
• A further exemption covers offers of securities admitted or to be admitted to trading on a UK regulated market, such as the London Stock Exchange’s main market, or a primary multilateral trading facility (MTF), such as AIM or the AQSE Growth Market. This is because the POATRs empower the FCA to set the prospectus and related rules for admission to these markets (although for certain matters these powers operate indirectly by enabling the FCA to require MTFs to have in place relevant rules).
• Offers of securities to raise £5 million or less (in any period of 12 months) will also be exempt. Offers to raise larger amounts would need to fall within another exemption or be made on an FCA-regulated public offer platform.
• Offers that would otherwise be exempt will still need to comply with an equality of information requirement unless they are below a £1 million threshold. This requires the offeror to ensure all material information disclosed to one investor is disclosed to all other investors.

FCA rules on admission to UK regulated markets and UK primary MTFs

• Broadly, the FCA has adopted the rules proposed in its consultation, with some changes in the specifics. The new rules will therefore require a prospectus to be published when a company seeks admission of its shares for the first time to trading on a UK regulated market, such as the London Stock Exchange’s main market, or a UK primary MTF that retail investors can access, such as AIM or the AQSE Growth Market (other than for certain simplified routes to admission).
  • The content requirements for a prospectus for admission to a UK regulated market (which, as now, would require FCA approval), will be largely the same as the current requirements based on the EU-derived Prospectus Regulation and related regulations. As a result, prospectus documents, together with the associated rights and obligations, will remain largely unaltered. However, as outlined in the consultation paper, there will be some important changes, most notably in relation to clearly demarcated ‘protected forward-looking statements’ (PFLSs) (where liability will be based on a fraud standard, rather than a negligence standard, provided the statement is within the scope of the FCA’s three-part approach, as originally proposed in its consultation). The prospectus summary will also see an increase to a maximum of 10 pages and other minor changes. The FCA plans to consult later in 2025 on additional guidance for PFLSs, working capital statements (which will still be required), complex financial histories and the new content requirements for climate-related disclosures. As proposed in the consultation, to encourage companies to include retail investors in fundraisings, an IPO prospectus will only need to be available for three working days before the offer ends, rather than the current six.
  • Under the POATRs, an MTF admission prospectus will be subject to the same statutory responsibility and compensation provisions as apply to a prospectus for admission to a UK regulated market. However, primary MTFs such as AIM and the AQSE Growth Market will be able to set their own content and approval requirements for an MTF admission prospectus within the framework of the POATRs and the FCA’s rules. In particular, the FCA’s rules address the responsibility attaching to producing an MTF admission prospectus, supplementary MTF admission prospectuses, withdrawal rights, PFLSs and advertisements. As it originally proposed, the FCA has decided to base these broadly on the equivalent rules for admissions to UK regulated markets, with adjustments to reflect the remit of primary MTFs to determine the content of MTF admission prospectuses. Alongside these changes, the London Stock Exchange is considering some potentially deregulatory changes to the AIM rules designed to enhance the attractiveness of AIM as a market.