On 26 July 2024 the FCA released a consultation paper (CP24/12 – Consultation on the new Public Offers and Admissions to Trading Regulations regime (POATRs)), outlining its detailed proposals for changes to the UK prospectus regime.
The new rules will impact companies listed on the London Stock Exchange's Main Market, and in some cases, companies listed on AIM and the Aquis Stock Exchange (AQSE) markets. The key theme of the consultation paper is to make UK markets more attractive for capital raisings and to support international competitiveness through enhancing market efficiency, reducing costs for issuers and ensuring robust investor protection.
The main proposals in the consultation paper include:
A) New rulebook – new 'Prospectus Rules: Admission to Trading on a Regulated Market' (PRM) sourcebook, which would replace the existing Prospectus Regulation Rules. The new proposed rules are set out in Appendix 1 of the consultation paper.
B) Prospectus requirements for listed companies – increasing the threshold for triggering the requirement to publish a prospectus for further issuances of securities already admitted to trading on a regulated market from 20 per cent. to 75 per cent. of existing share capital. This is a significant and positive development from the FCA as, although 75 per cent. was suggested by the Secondary Capital Raising Review, the EU recently agreed a 30 per cent. threshold. Listed companies will be able to raise funds in a more efficient way from both time and cost perspective, this proposal addresses one of the main criticisms of UK capital markets. Listed companies can still produce an FCA approved voluntary prospectus for issuances below this threshold.
C) Protected forward-looking statements (PFLS) – providing a clear framework for PFLS to give issuers legal certainty (by making the test for liability a recklessness standard, currently it is a negligence standard) and ensuring investors can assess such content. In principle, this should encourage listed companies and directors to include more forward-looking statements in prospectuses, but the impact can only be properly assessed once the detailed rules are in place.
D) Primary MTFs such as AIM and AQSE markets – requiring an MTF admission prospectus for all initial admissions to trading and reverse takeovers (with certain exceptions for existing simplified routes to admission). It means that such MTF admission prospectuses will be subject to the same statutory responsibility and compensation provisions as apply to prospectuses, including investor withdrawal rights. The aim of this change is allowing retail investors to participate in IPO fundraisings on AIM and AQSE markets. Companies looking to list on AIM or AQSE will need to understand impact of the increased investor protection, as well as costs associated with preparation of the MTF admission prospectus.
E) Sustainability disclosures – requiring climate-related disclosures in prospectuses where relevant (when an issuer has identified climate-related risks as risk factors, or climate-related opportunities as material to the issuer's prospects) and minimum information set out in Annex 1 of the PRM to outline the areas of climate disclosure expected, aligned with the high-level categories common to the TCFD and ISSB standards. As part of the consultation, the FCA would like to get insights on the importance of such disclosures vis-à-vis potential costs from this proposal and impact on UK market attractiveness.
F) Retail offers – reducing the minimum availability period for retail investors, from six days to three days, giving companies more flexibility to raise capital.
The deadline for comments on the consultation paper is 18 October 2024. The FCA aims to finalise the new rules by the end of the first half of 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.