Prospectus Regime Change

Following the Lord Hill review and the subsequent FCA consultation, the Government has announced that it will replace the current prospectus regime. The UK Prospectus Regulation is going to change to separate (i) regulation of public offers of securities and (ii) regulation of admissions of securities to trading.

A prospectus will be required for admission to trading on regulated markets, but no longer for public offerings. There will be a general prohibition on public offerings of securities subject to exemptions. The existing exemptions will be expanded to cover:

offers of securities that are, or will be, admitted to UK regulated markets;
pre-emptive offers of securities to those who already hold equity securities;
offers of securities that are or will be admitted to trading on certain multilateral trading facilities;
offers of securities made by private companies through a platform operated by a firm specifically authorised for the purpose; and
offers of securities made by companies that have prepared documents according to the rules of a relevant overseas jurisdiction and market.

Existing exemptions relating to offers to ‘Qualified Investors’, offers to fewer than 150 persons and offers under employee share schemes will be retained.

The biggest change here is that admission documents published in accordance with the AIM rules will be treated as a type of prospectus. This opens the door to a potential return to rights issues in the mid-market and is something that the AIM community campaigned for (unsuccessfully) at the time of the introduction of the prospectus regime in 2005.

To increase the capital raising options available to private companies, there will no longer be a requirement for an FCA-approved prospectus for offers over €8 million in any 12 month period. Instead, securities will be allowed to be offered to the public provided that the offer is made through a platform operated by a firm specifically authorised for the purpose. There will be a new regulated activity covering the operation of an electronic platform for the public offering of securities eg crowdfunding.

We await the full legislative framework.

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