UK Prospectus Regime Reform Review Outcome: is this the path to a complete rethink?

The UK Prospectus Regime Review Outcome (PRRO) published by HM Treasury at the beginning of March 2022 gives us further insight into the policy approach the Government will take in walking the tightrope of providing a more dynamic regulatory environment as permitted by Brexit, while maintaining high standards of investor protection. 

The PRRO confirms that the FCA will get enhanced rule making responsibilities, including the discretion to decide whether a prospectus is required when securities are admitted to trading on UK regulated markets. 

Offers to the public will be subject to a "new architecture", whereby issuers who wish to offer to the public will need to fit into an exemption from a general prohibition of offers of securities to the public.  Exemptions will include those currently listed in Article 1(4) of the Prospectus Regulation, but will be expanded to cover:

• offers of securities on UK Regulated Markets;
• pro rata offerings of securities to those who already hold securities in the offering company; and
• junior markets (including AIM) – offers of securities which are admitted to trading on certain multilateral trading facilities.

In the case of private companies, there will be a removal of the requirement for a prospectus on offers over €8m in size, but securities must be offered to the public through a platform operated by a firm authorised for this purpose.

Other headline points include:

• the FCA will have the discretion to decide if a prospectus is required for a further issuance by an existing listed issuer and whether offering documents from an overseas market will suffice for public offerings into the UK;
• where prospectuses are required, the single statutory "necessary information" test will be retained, with some amendments, including no differentiation in disclosure between equity securities over and under €100,000, and a modified necessary information test for debt securities, to focus on an issuers creditworthiness rather than prospects; and
• the FCA will decide which categories of forward looking statements can be subject to a higher threshold of liability with the aim of allowing more meaningful forward looking statements to be made.

It will be interesting to see whether these intended changes, moving towards an alignment of disclosure requirements for retail and non-retail investors, widens the range of issuers offering to the former, or has the effect of increasing the disclosure requirements for those offering to the latter.