A person will be required to publish a prospectus if it makes an offer of transferable securities to the public in the UK (‘public offer trigger’) or applies for the securities to be admitted to trading on a regulated market in the UK (‘regulated market listing trigger’). Breach of the requirement to publish a prospectus is a criminal offence.
There are exemptions from the requirement. Exemptions that apply to the public offer trigger include the following:
- the offer is made to or directed at qualified investors only;
- the offer is made to or directed at fewer than 150 natural or legal persons (other than qualified investors) per EEA state;
- the minimum denomination per unit is at least €100,000.
Exemptions that apply to the regulated market listing trigger include the following:
- the securities are fungible with securities already admitted to trading on the same regulated market provided that they represent, over a period of 12 months, less than 20 per cent of the number of securities already admitted to trading on the same regulated market; and
- shares are offered, allotted or to be allotted free of charge to existing shareholders, where the shares are of the same class as the shares already admitted to trading on the same regulated market.
Where a prospectus is required, FSMA and the PRs specify the information it must contain. The overarching requirement is that the prospectus must contain all the information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the issuer and of any guarantor and of the rights attaching to the securities. The PRs require that a prospectus that is drawn up as a single document must contain, among other things:
- a business and industry section;
- risk factors;
- an operating and financial review;
- two or three years’ audited financial statements (depending on the type of securities) prepared in accordance with IFRS or an equivalent GAAP;
- information about trends since the date of the last financials; and
- details about the securities.
In terms of the specific content required for each type of securities, the PRs adopt a ‘building block’ approach, under which separate annexes provide for different minimum disclosure requirements for different types of securities. The PRs include a road map designed to help issuers combine the annexes for the relevant type of securities being offered.
The requirements will be amended by the new Prospectus Regulation, the bulk of which will apply from July 2019 (see ‘Update and Trends’).
An issuer should also take account of regulatory guidance including the FCA’s knowledge base and the European Securities and Markets Authority’s questions and answers on prospectuses. The contents of prospectuses are also subject to market expectations, the requirements of investors and recommendations by industry bodies such as the International Capital Market Association.
An issuer issuing debt securities under a programme may publish the prospectus in the form of a base prospectus, which can be supplemented by a supplementary prospectus and final pricing document upon each additional tranche being issued.
The LRs set out the filings to be made to the FCA by an issuer applying for admission of its securities to the Official List. Any issuer applying for admission of its securities to listing will need to submit, among other things, an ‘Application for Admission of Securities to the Official List’ and written confirmation of the number of securities to be issued or allotted. If a prospectus is required for the offering or the issuer is permitted and elects to draw up a prospectus for the securities, a prospectus must have been approved by the FCA. After a prospectus is approved by the FCA, it must be filed with the FCA at the same time it is made available to the public. Under the passporting mechanism of the Prospectus Directive, once a prospectus has been approved in one EEA country, it is valid throughout the EEA upon passporting. Therefore, if another EEA State is the home member state for the securities, the application for listing must include a copy of the prospectus, a certificate of approval and (if applicable) a translation of the summary of the prospectus.
The LRs require listing particulars to be prepared and published for certain ‘specialist’ securities (securities that, because of their nature, are normally bought and traded by a limited number of investors who are particularly knowledgeable in investment matters) that are the subject of an application for listing in circumstances where a prospectus is not required. This will apply, for example, to the admission of securities to the LSE’s Professional Securities Market (PSM) for specialist debt and equity-linked securities where the securities are not being offered to the public. Listing particulars also have to be approved by the FCA. The PSM is an MTF.
Specific filings and compliance with information requirements will also be needed depending on the type of offering. For example, applications for admission of equity shares to the premium segment of the Official List (‘premium listing’) are subject to ‘super-equivalent’ UK requirements in addition to requirements based on EU legislation. For instance, commercial companies applying for premium listing must have published or filed historic financial information that covers at least three years and represents at least 75 per cent of the company’s business for the full three-year period. Premium listing applicants will also need to appoint a ‘sponsor’ (typically an investment bank) who will need to ensure that the issuer has complied with the applicable conditions for listing. The premium segment is divided into four categories: equity shares of commercial companies, closed-ended investment funds, open-ended investment companies and sovereign controlled commercial companies (which, uniquely, may also list global depositary receipts in the premium segment). Any other listing will be a standard listing.
The filings to be made with the exchange on which the securities are to be admitted to trading will depend on the rules of the relevant exchange. For instance, an issuer applying for admission to the Main Market of the LSE must complete an application form giving details of the number, nature and characteristics of the securities to be traded and basic details about the issuer such as a description of its business. Companies seeking admission of their securities to the LSE’s AIM must produce an AIM admission document. AIM is an MTF designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List. The AIM admission document needs to satisfy the content requirements for a prospectus if a prospectus is required, or alternatively the PRs with certain carve-outs. A company applying for admission to AIM must appoint a nominated adviser (‘nomad’) who is responsible for assessing, among other things, the appropriateness of the company and its securities for admission to AIM. The nomad must make a declaration to AIM that, among other things, to the best of its knowledge and belief, all applicable requirements of the AIM rules and nomad rules have been complied with in connection with the application for admission.
Back to top