UK equity capital markets - the FCA's proposed prospectus rules for admissions to UK public markets

• 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.
• The POATRs cannot come fully into effect until the FCA has consulted on, and brought into force, its own rules for the prospectus requirements for admissions to, and secondary offerings on, UK regulated markets and primary MTFs and its rules for operating an FCA-regulated public offer platform.

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

• The FCA proposes to make rules that would 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), would be similar to the current requirements based on the EU-derived Prospectus Regulation and related regulations. There would, however, be some important changes, most notably in relation to ‘protected forward-looking statements’ (where liability would be based on a fraud standard, rather than a negligence standard) and sustainability-related information. The FCA also seeks further views on whether it should change the requirements for working capital disclosures. To encourage companies to include retail investors in fundraisings, a prospectus for a retail offering would 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. The latter will include rules on the responsibility attaching to producing an MTF admission prospectus, supplementary MTF admission prospectuses, withdrawal rights, protected forward-looking statements and advertisements. The FCA intends to base these on the equivalent rules for admissions to UK regulated markets, with adjustments to reflect the remit of primary MTFs to determine the content of MFT admission prospectuses.
• In relation to further issues of shares already admitted to trading:
  • The most significant change would be for secondary issues of shares already admitted to trading on a UK regulated market. Here, the FCA intends only to require a company to publish a prospectus for a further issue of these shares if it is equal to 75 per cent or more of existing share capital (in any period of 12 months). This is a significant increase from the current threshold of 20 per cent. However, the FCA will still be able to approve a prospectus to be published on a voluntary basis below this threshold (e.g., if one is required for an international offering). The FCA seeks further views on whether different rules should apply where a company in financial difficulties is proposing a secondary offering.
  • The FCA’s proposed framework rules would not require a company with shares admitted to a primary MTF such as AIM or the AQSE Growth Market to publish a prospectus for a further issue of these shares (unless it involves a reverse takeover). However, the relevant MTF will be able to make its own rules on secondary offerings.

Where a prospectus is not required for a follow-on offering, companies will still need to be mindful of their obligations under the Market Abuse Regulation, and to ensure they do not publish information which is inaccurate or misleading, or which omits important information.

• In relation to takeovers where the consideration includes equity securities that are to be admitted to trading, the FCA proposes to retain the current concept of ‘exemption documents’, but seeks further views. The FCA also intends to carry over from the Prospectus Regulation a number of other exemptions from having to publish a prospectus for a further issue of shares of a class already admitted to trading on a regulated market, including for conversions (below a 75 per cent threshold), bonus issues, scrip dividends and employee share schemes.

Next steps

• The FCA requests responses to its consultation by 18 October 2024, with a view to finalising its new rules by the end of the first half of 2025.

Client Alert 2024-175