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18 juillet 2023 Lucy Fergusson Capital Markets - Debt - Capital Markets - Equity

Revised draft of regulations relating to public offers and prospectuses

A revised draft of the public offers and admission to trading regulations has been published. These regulations will be made under the Financial Services and Markets Act 2000 and will replace the retained EU law Prospectus Regulation.

The statutory instrument will introduce a new regulatory framework governing public offers and admissions to trading of securities. An earlier draft of this SI was published in December (as part of the “Edinburgh reforms” package) – see Towards a new UK prospectus regime.

Changes from the original draft

Changes in the new draft compared with the original include the following:

The “necessary information” test has been clarified for debt securities. This test, which describes the general requirement for information in prospectuses, will (as at present) require information to be disclosed to enable investors to make an informed assessment of the assets and liabilities, profits and losses, financial position and prospects of the issuer and of any guarantor. For issuers of debt securities only, the new draft clarifies that the term “prospects” is to be read as a reference to the creditworthiness of the issuer and any guarantor.
In order to address concerns in the initial draft that a wide range of financial contracts that are not securities (or quasi-securities), including certain OTC derivatives and loans, would be caught by the public offer regime, the definition of “relevant securities” has been amended.
The new definition of forward-looking statements has been made non-exhaustive, and the specified types of statement include “guidance” in prospectuses. The definition applies for the purpose of the new less onerous liability regime for designated types of forward-looking statements. The Financial Conduct Authority’s Engagement Paper 3 (see here) discusses what types of statement should benefit from this regime, which is designed to encourage more useful disclosures in prospectuses. The revised draft also contains wording to extend the safe harbour to persons who are not responsible for the prospectus but may otherwise have liability.
Offers of up to £5 million over 12 months will be exempt from the general prohibition of public offers of securities.
There is a broader exemption for offers by untraded companies to existing shareholders, and other connected persons, and the takeovers exemption is also expanded.
The FCA will be able to make primary multilateral trading facilities (for example, the London Stock Exchange’s Alternative Investment Market) require publication of an “MTF admission prospectus” as a condition of admission to trading, but this will not apply to MTFs which are for qualified investors only. The FCA will not approve MTF admission prospectuses but they will be subject to the same general disclosure standards and statutory liability as regulated market prospectuses.

Further information and timing

The new draft has been published alongside the “Mansion House reforms” (see Mansion House Reforms aim to deliver a smarter regulatory framework). The Government outlines the provisions of the SI in Policy Note - The Public Offers and Admissions to Trading Regulations 2023 and says it would welcome any technical comments on the draft instrument by 21 August 2023. The final statutory instrument is expected to be laid before Parliament by the end of 2023.