The Financial Conduct Authority has published the consolidated feedback received following its engagement with the market (via both engagement papers and roundtables) on the details of the new public offers and admissions to trading regime. The FCA does not set out any decisions it has made in relation to these points but, in general, respondents support improving the requirements already in place, rather than pursuing a more radical approach. In this briefing we summarise the key feedback in relation to equity issuances on regulated markets and non-equity securities.
Timing of final rules
The FCA anticipates consulting on proposals, including draft rules, in summer 2024 and plans to “engage widely” with the market. It will then seek to make final rules in the first half of 2025.
Support for a prospectus on admission to a regulated market
- The majority of respondents were in favour of requiring a prospectus for the admission of securities to regulated markets and retaining the bulk of prospectus requirements.
- Some suggested expanding the scope of some of the exemptions, for example to allow the substitution of existing shares without a prospectus where ‘top cos’ are placed on an existing issuer without raising new capital from investors.
Mixed responses on where to set the threshold for requiring a prospectus on a further issuance
- The responses ranged from supporting raising the threshold for further issuances without a prospectus to 75% (as set out in the Secondary Capital Raising Review, see our briefing here) to staying with the current 20% threshold.
- There was support for considering whether certain types of transaction (for example, those prompted by financial distress) should trigger the requirement to produce a prospectus, regardless of any threshold.
- In relation to whether an alternative document should be produced below the threshold, the response was mixed but the FCA notes that in roundtables many felt that existing offer announcements typically contained all the key information investors needed.
Prospectus contents – improving the current structure
- Generally respondents felt that changes should be incremental to the existing requirements.
- The main areas suggested for improvement included, issuers’ capital history, material contracts, pre-IPO disclosed forecasts and financial information.
- Most supported further clarity in relation to the ESG-related information that should be included in the prospectus.
- Most respondents were in favour of keeping the summary but with more flexibility to make it bespoke.
- An overwhelming majority were against making quarterly financial information mandatory.
- There was almost unanimous opposition to mandatory incorporation by reference but some respondents were in favour of permitting future incorporation by reference, for example future financial statements.
- Most respondents favoured retaining the current 12-month validity period of a prospectus.
Respondents support a broad approach to protected forward-looking information (PFLS)
- In relation to defining PFLS, most preferred an approach based on a general framework or guidance with illustrative examples.
- There was almost unanimous support for a definition encompassing all types of information, including ESG-related disclosures, with targeted exclusions such as the working capital statement.
- Respondents were in favour of a statement that identifies information as PFLS and highlights its inherent uncertainty and the different liability standard that applies.
Non-equity securities
- For wholesale debt capital markets, with one exception, there was agreement that the current UK prospectus regime broadly works well.
- There was almost unanimous support for the removal of the dual disclosure regime for retail and wholesale debt securities with strong support for using the wholesale disclosure standard as the starting point for alignment.
- The introduction of a scheme to facilitate broader access to listed bonds issued by UK-listed corporates was welcomed but there was no consensus on the types of securities or issuers that should fall within the scope of any such scheme.
- For green, social or sustainability labelled debt securities respondents generally supported work towards greater alignment between a prospectus and bond framework documents. The FCA’s Engagement Paper 4 (paragraphs 59 – 62) set out two approaches to framing new disclosure requirements – no one approach was favoured by respondents and there was mixed feedback regarding how granular any disclosure requirements should be.
Reminder – the FCA engagement papers
The four initial engagement papers were published in May 2023 (see our briefing here):
- Admission to trading on a regulated market
- Further issuances of equity on regulated markets
- Protected forward-looking statements
- Non-equity securities
Two further engagement papers were published in July 2023 (see our briefing here):
For further information, please contact:
Ben Dulieu, Partner, Linklaters
ben.dulieu@linklaters.com
