The UK government has set out its policy approach to reforming the UK’s prospectus regime. As proposed in its July 2021 consultation paper, which followed on from the recommendations in Lord Hill’s UK Listing Review, the government intends to proceed with the creation of a new UK regime to replace the current EU-derived Prospectus Regulation regime. The most significant change, as proposed in the consultation paper, will be to separate the regulation of public offers of securities from the admission of securities to UK regulated markets. While the FCA will be able to require a prospectus for admissions to trading on UK regulated markets, prospectuses will not be a feature of the public offerings regime. The consequences of this change and related changes are summarised below.
Admission to, and securities offerings on, UK regulated markets
- The FCA will have responsibility for regulating all aspects of admission to UK regulated markets (such as the London Stock Exchange’s Main Market). This will include the power to decide if and when a prospectus is required (such as at the time of IPO or admission). The FCA will also be able to decide the content requirements for a prospectus, and the disclosure requirements for secondary offerings by listed companies and secondary listings by overseas companies on UK regulated markets. The FCA will also determine whether or not it needs to review and/or approve a prospectus before publication.
Disclosure standard and liability for a prospectus
- The general disclosure standard for an equity prospectus (requiring disclosure of “all necessary information”) will continue to apply, but will be modified for secondary offerings. Liability for general prospectus content will remain unchanged, but liability for forward-looking information (specifically identified as such and accompanied by appropriate warnings) will arise in the event of recklessness or dishonesty, rather than negligence. A modified general disclosure standard, focusing on issuer/guarantor creditworthiness, rather than prospects, will apply to debt securities (and the existing differentiator for denominations equal to €100,000 or above will no longer apply).