Keeping up the rapid pace of reform of the UK capital markets rules, following finalisation of the new UK Listing Rules (UKLR) which came into force on 29 July 2024, the UK Financial Conduct Authority (FCA) has published a consultation paper (CP24/12) on the prospectus regime which includes some radical changes.
The prospectus regime reform will markedly reduce the occasions when an issuer will need to publish an FCA-approved prospectus other than on an IPO. The reforms will introduce more targeted and proportionate requirements across the whole of the capital markets regime, reducing costs for UK-listed issuers, improving the quality of information available to investors via protected forward-looking statements, and removing barriers to retail participation.
The UKLR significantly reduced the regulatory burden for London Main Market-listed issuers. The proposals for the new prospectus regime are intended to dovetail with the UKLR to make listing and raising capital in the UK more competitive globally. Some of the rules will also apply to companies seeking admission to a multilateral trading facility (MTF), which include AIM and AQSE.
The consultation period runs until 18 October 2024. The FCA aims to finalise the rules by the end of H1 2025. The final rules will be called the Prospectus Rules: Admission to Trading on a Regulated Market sourcebook (PRM) and will replace the existing Prospectus Regulation Rules in the FCA Handbook.
Key points for Main Market IPOs and issuers
- An FCA-approved prospectus to remain a central feature of UK IPOs of equity shares on a regulated market.
- Following IPO, a prospectus will only be required to issue 75% or more of a listed company’s issued share capital in a 12-month period.
- A more flexible complex financial history regime to be introduced, allowing issuers more choice in disclosing financial information of acquired assets.
- A 12-month working capital statement will be retained, but potentially with the ability to include assumptions and significant judgements in the disclosure.
- An issuer will have to include certain additional climate-related disclosures where it has identified climate-related risks or opportunities as material to its prospects.
- Permitted length of summaries to be extended to ten pages, with fewer mandatory financial disclosure requirements. Cross-referencing to other parts of the prospectus to be allowed. An issuer’s discretion whether to incorporate by reference to be retained.
- “Protected forward-looking statements” to be introduced, allowing prospectuses to include guidance on future performance under a lower liability regime.
- For a takeover by means of an exchange offer, an “equivalent document” describing the transaction may still be published instead of a prospectus i.e. avoiding duplication of content in an offer document and prospectus.
- Reduction of the period for which a prospectus must be made public before admission on an IPO to be reduced from six to three working days.
Key points for “Primary MTFs” and issuers
- “MTF admission prospectus” required for IPOs (whether or not there is a retail offer) and reverse takeovers (except via the AIM Designated Market Route or the AQSE fast-track route).
- Delegation to the market operator (i.e. the London Stock Exchange for AIM) to set disclosure requirements for MTF admission prospectuses, except for the new “protected forward-looking statement” disclosure and liability regime which will apply.
- The FCA will not approve MTF admission prospectuses – setting the review requirements will also be delegated to the market operators.
- MTF admission prospectuses will broadly be subject to the same rules concerning supplementary prospectuses, prospectus advertisements, prospectus responsibility, withdrawal rights and the proposed three-working day offer period for retail offers.
- AIM and AQSE issuers will not be subject to the 75% threshold referred to above, and market operators will be free to set thresholds (if any) for prospectus requirements for further issues.
For further detail, download our full insight below.
If you would like to discuss the content of this article, please contact Paul Airley or Nigel Gordon from our capital markets team.
