As mentioned, the FCA has focused on targeted and incremental amendments in the context of IPO prospectuses for regulated markets (such as the Main Market) rather than a wholesale rewrite of the rules. Proposed changes include (among others): amendments to the rules around the content and format of the prospectus summary (including removing the need for it to include detailed financial information, permitting cross-references to information elsewhere in the prospectus, and increasing the page limit from seven to ten pages); allowing for incorporation by reference (subject to various provisos); and requiring enhanced climate-related disclosures in certain circumstances. In the context of financial information, the FCA has provided draft guidance on the approach to issuers with complex financial histories and is also seeking views on whether requirements around the age of the latest financial information in a prospectus should be changed to mirror the position that historically applied under the premium listing rules. The FCA is also consulting on the working capital statement, including its interaction with viability and going concern disclosures in annual financial statements and whether to allow disclosure of significant judgements made in its preparation (including assumptions and sensitivity analysis).

It is proposed that, where an IPO involves a public/retail offer, the minimum period for which the offer must be open following publication of the prospectus should be reduced from six working days to three. This is consistent with the recommendations of the UK Secondary Capital Raising Review which identified the current rule as a significant barrier to issuers involving retail investors in their capital raisings.

As mentioned above, the FCA is proposing that the current 20% annual prospectus exemption for admission of further shares to a regulated market (such as the Main Market) post-IPO should be increased to 75% consistent with the recommendations made in the UK Secondary Capital Raising Review. This approach reflects the fact that, where securities of the same type are already admitted to a regulated market, there are less likely to be concerns about information asymmetry than on an IPO given issuers’ continuing disclosure obligations under the UK Market Abuse Regulation, DTRs etc. An issuer would however still be able to publish an FCA-approved prospectus on a voluntary basis below the 75% threshold if it wanted to do so.

Whilst the FCA recognises that the above approach has the advantage of simplicity and offers an objective metric, it is also seeking views on a possible supplementary approach to further share issues by companies in financial difficulty given the heightened risks posed to investors in these circumstances. Although it has not proposed any specific rules at this stage, the Consultation does discuss some possible approaches that could be taken.

As mentioned, the POATRs introduce the concept of a MAP in the context of “primary MTFs” such as AIM. This is intended to enable primary MTF issuers to offer securities to the public without the burden of having to produce an FCA-approved prospectus, thereby encouraging wider participation in the ownership of such companies. 

The detailed content requirements (and any approval or validation process) for a MAP would be set by the relevant MTF operator not by the FCA, and the POATRs specifically prevent the FCA from requiring MAPs to be reviewed or approved by it. However, the FCA has power to require operators of certain primary MTFs (being those, including AIM, which are not restricted to qualified investors) to include provisions in their rules obliging issuers to publish a MAP in specified circumstances. In this context, the FCA is only proposing to require a MAP for initial admissions to trading and for the admission of enlarged entities resulting from a reverse takeover (there will be an exception for existing simplified routes to admission – i.e., the AIM designated markets route and the AQSE Growth Market fast-track route). Primary MTFs will be free to voluntarily update their rules to require a MAP in other situations if they wish to do so (for example in connection with secondary issues of shares).

The FCA intends to remove the current concept of a growth prospectus. It has also determined that it does not have power to create a voluntary prospectus regime for primary MTF issuers, except in limited circumstances.

Although forward-looking information is of key importance to investors, it is recognised that liability concerns can currently deter issuers from including it in prospectuses. To address this, and encourage increased disclosure, the POATRs will introduce a fraud/recklessness-based liability threshold (derived from the standards that already apply to certain disclosures post-IPO) for “protected forward-looking information” or, as defined above, PFLS contained in prospectuses (including MAPs). The existing negligence-based threshold will otherwise continue to apply. As a practical point it is worth keeping in mind that, although (once in force) the new liability regime for PFLS should mean that from a UK perspective, issuers have greater flexibility to include certain forward-looking statements in their prospectuses, where shares are being offered outside the UK they will still need to consider the implications of any applicable overseas liability regimes which (as a practical matter) may restrict the extent and content of any such disclosures.

The Consultation sets out the FCA’s approach to the detailed rules underpinning the relevant provisions of the POATRs, in particular how PFLS would be defined and presented.

It is proposed that the definition of PFLS should encompass both financial and operational data meeting certain criteria (including as to preparation). However, as the regime is intended to encourage greater voluntary inclusion of forward-looking statements by issuers, in the FCA’s view, almost all mandatory disclosures should be excluded from the scope of PFLS. For regulated market issuers, there would be some targeted exceptions to this in order to encourage more detailed disclosure than is typically made under the current regime (for example to allow, among other things, certain of the mandatory disclosures contained in the OFR and certain mandatory climate-related disclosures to be treated as PFLS provided they meet the other applicable criteria). For MAPs, the FCA cannot use targeted exceptions in this way as the detailed contents requirements for the MAP will be set by the relevant MTF operator – therefore it proposes that for primary MTF issuers, PFLS would exclude any information required to be disclosed in a MAP.

In terms of presentation and labelling, the FCA’s proposed rules are intended to ensure PFLS is clearly identified and demarcated and are accompanied by appropriate general statements about the associated risks and specific statements containing prescribed information intended to enable investors to evaluate the quality of the disclosures.