Comment

Following the introduction of the substantially revised UK Listing Rules this time last year, the new rules for the prospectus regime are similarly focused on reducing the burden on listed companies, reducing costs, making the UK market more competitive internationally and encouraging wider access to the UK capital markets (in particular by retail investors).

The FCA will consult later in the year on guidance to be published in technical notes in relation to a number of key areas including climate-related disclosures, the takeover exemption, working capital statements and protected forward-looking statements.

It is encouraging that the FCA has been receptive to feedback from market participants and the new regime represents another important step towards improving the international competitiveness of London as a listing venue of choice.

In depth

The policy statement sets out the FCA's final rules to implement the new Public Offers and Admissions to Trading Regulations 2024, which will replace the UK Prospectus Regulation. The key points to be aware of can be summarised as follows:

• The threshold at which a prospectus is required for a further issuance of transferable securities will be increased from 20% to 75% of those same securities already admitted to trading. This is as expected and in line with the recommendations of the Secondary Capital Raising Review. Issuers will retain the ability to publish a prospectus on a voluntary basis which the FCA will review and approve.
• The other existing exemptions from the requirement to publish a prospectus (in Article 1(5) of the UK Prospectus Regulation) will be carried forward into the new rules.
• The prospectus requirements for lower denomination bonds will be aligned with those for higher denominations by requiring a single set of minimum disclosure content for prospectus documents for non-equity securities – this constitutes a relaxation of the requirements for lower denomination bonds and is intended to encourage (or at least remove disincentives for) issuers to extend bond offerings to retail investors.
• Other deterrents in the FCA handbook to listing low denomination bonds will be removed for "non-complex listed corporate bonds" (essentially bonds listed by an ESCC listed issuer or a wholly owned subsidiary which bear interest at a fixed or floating rate, are unsecured, are not convertible or asset backed and are not contractually subordinated), though these will now instead be named "plain vanilla listed bonds".
• The number of days a prospectus needs to be publicly available for Initial Public Offerings (IPOs) will be reduced from six working days to three working days. This reflects the prevalence of online access and is again intended to remove disincentives for offerings to be extended to retail investors.
• Minor changes will be made to the prospectus summary to increase the maximum number of pages (from 7 to 10), to introduce cross-referencing and to reduce contents requirements (in particular, the annex of financial information will no longer need to be included).
• No change will be made to the requirement for a working capital statement to be included, although the FCA will later this year consult on two proposals to amend existing working capital guidance via a Primary Market Bulletin.
• A definition will be introduced for the types of statements that will be subject to the liability regime for protected forward-looking statements (PFLS), which uses a recklessness/dishonesty liability standard with the burden of proof on the claimant (compared to the general regime using a negligence liability standard with the burden of proof on the defendant). To fall within the PFLS liability regime a statement will, broadly, need to meet the following criteria:
  • The statement contains certain financial or operational information;
  • Whether the statement is untrue, misleading, or omits material information can only be determined by reference to events or sets of circumstances that occur after the statement has been published;
  • The statement includes an estimate as to when the event or set of circumstances to which the statement relates is expected to occur; and
  • The statement contains information that a reasonable investor would be likely to use as part of the basis of their investment decisions.

A PFLS will also need to be accompanied by a content-specific accompanying statement, whilst the prospectus will also need to contain a general accompanying statement.

• Further issuances of securities of the same class as those already listed will no longer require a further listing application process but instead will be treated as automatically listed when issued, though a market notification will be required (the intention is that it will be possible to align these notifications with the total voting rights notification under Disclosure Guidance and Transparency Rule (DTR) 5 and avoid confusion).
• A new climate-related disclosure rule will be introduced for certain equity issuers (those who have identified climate-related risk factors, or where climate-related opportunities are material to their prospects), whilst if a transition plan has been published and its contents are material a summary should be provided as well as details of the plan and where it may be located and inspected. Optional disclosures will also be introduced to improve transparency of sustainability-labelled debt instruments. The FCA has sought to align the climate-related disclosures with the Task Force on Climate-related Financial Disclosures (TCFD) reporting regime and the International Sustainability Standards Board (ISSB) standards (upon which the forthcoming UK Sustainability Reporting Standards will be based).
• The FCA plans to consult via Primary Market Bulletins later in 2025 on additional guidance for a number of key areas, including the takeover exemption, climate-related disclosures, working capital statements and protected forward-looking statements.