Listing New Securities

Approval and Publication of a Prospectus

The Approval Process

As mentioned in Chapter 2, before a prospectus may be published, it must be submitted to, and approved by, the issuer’s competent authority (which is the FCA for UK issuers) (PR 3.1.10R). Under section 87 of FSMA and PR 3.1.7R, the FCA may not approve a prospectus unless it is satisfied that:

  • the UK is the home member state in relation to the issuer; and
  • the prospectus contains all necessary information and otherwise complies with the Prospectus Rules and FSMA.
In order to obtain this approval, an issuer is required to lodge the following with the FCA (PR 3.1.1R):

  • a completed Form A (application for approval of a prospectus);
  • the prospectus;
  • if the order of items in the prospectus does not coincide with the orders in the schedules and building blocks, a cross-reference list identifying the pages where each item can be found in the prospectus;
  • a letter identifying nonapplicable items in the schedules and building blocks;
  • if information is incorporated in the prospectus by reference to another document, a copy of that document;
  • if relevant, a request for omission of information from the prospectus;
  • contact details of individuals able to answer queries from the FCA; and
  • any other information the FCA may require.

The completed Form A, the relevant fee, and drafts of all other documents referred to above must be submitted to the FCA at least 20 working days before the intended approval date, in the context of an IPO or an issuer not otherwise listed on a regulated market that has not previously had a prospectus approved by the FCA, or at least 10 working days before the intended approval date, in the context of a prospectus published by an issuer with a listing on a regulated market. Final-form versions of any draft documents submitted must be submitted to the FCA before midday on the required approval date.

On 30 November 2015, the European Commission published a delegated regulation with regard to regulatory technical standards for approval and publication of prospectuses (the "Delegated Regulation"). The Delegated Regulation made the following key changes:

  • all drafts of a prospectus must be submitted in searchable electronic formats;
  • the first draft of a prospectus must be accompanied by a cross-reference list if so requested by a national competent authority or the issuer may provide them voluntarily. Otherwise, if the order of information items in the prospectus does not coincide with that set out in the current Prospectus Regulation, the prospectus must be annotated in the margin and accompanied by a document setting out the items that are not applicable; and
  • all subsequent drafts must include a blackline, provided that: (i) "page pulls" will suffice if there are limited changes only; and (ii) any changes not showing in the blackline must be identified in writing.

Further changes set out in the Delegated Regulation have been discussed in more detail in this chapter.

Moreover, if adopted by the European Parliament and the Council of the EU, the Proposed Prospectus Regulation will reform some of the current requirements for approval and publication of prospectuses. Where relevant, proposed changes under the Proposed Prospectus Regulation have been highlighted throughout this chapter. 

Publication Requirements

Once a prospectus has been approved by the FCA, it must be filed and made available to the public as soon as practicable—in any case, at a reasonable time in advance of (and, at the latest, the beginning of) the offer or admission to trading of the securities involved. In the case of a public offer of a class of shares not already admitted to trading but in respect of which an application for admission to trading has been made, it must be filed and made available to the public at least six business days prior to the end of the offer (PR 3.2.2R and 3.2.3R). A prospectus may be made available to the public through:

  • publication in a national newspaper where securities are to be offered;
  • distribution in printed form, free of charge, at the offices of the London Stock Exchange, the registered office of the issuer, and the offices of the placing agent;
  • distribution in electronic form on the website of the issuer or, if applicable, the placing agent; or
  • distribution in electronic form on the website of the London Stock Exchange36.

Under the Amending Directive, an issuer that publishes a prospectus in accordance with (i) and (ii) above must also publish the prospectus in electronic form, on either its own website or that of its placing agent.

Under the Delegated Regulation, the prospectus published in electronic form must:

  • be easily accessible, in searchable electronic format, downloadable and printable; and
  • not contain hyperlinks, except to include hyperlinks to each document incorporated by reference or the document's website.

Prospectuses made available via the issuer's website "shall take measures" (e.g. insertion of a disclaimer) to avoid targeting jurisdictions where the public offer is not being made. Access to a prospectus in electronic form must not be conditional on registration, the acceptance of a disclaimer limiting legal liability or payment of any fee.

The Proposed Prospectus Regulation seeks to remove two of the publication options for an approved prospectus: (i) the publication in a newspaper; and (ii) the distribution in printed form at the office of the issuer. However, the requirement to provide a free copy to anyone who requests it is retained.37 The prospectus will be deemed available to the public where it is made available on the website of any one of the issuer, offeror or person asking for admission, the financial intermediaries placing or selling the securities or the website of the regulated market. It is also proposed that ESMA will develop an online searchable library for EU investors. The competent authority will be tasked with supplying ESMA an electronic prospectus once it is approved, as well as data necessary for ESMA classification.

Overseas Issuers: Home Member State

Under the Prospectus Directive, each issuer has a home member state, regardless of whether or not it is incorporated in the EEA. The competent authority of an issuer’s home member state is the entity responsible for approval of prospectuses, so the identity of the relevant home member state will be important.

The home member state of an issuer of equity (including convertibles) or low-denomination debt incorporated in the EEA (an EEA issuer) will always be the member state in which it has its registered office.

However, the analysis is more complex for an issuer of equity (including convertibles) and low-denomination debt38 not incorporated in the EEA (a non-EEA issuer), as its home member state will be either:

  • the member state in which its securities are intended to be offered to the public for the first time after 31 December 2003; or
  • the member state in which it makes its first application for admission to trading on a regulated market in the EEA,

at the election of the issuer, offeror or person asking for admission, although an election by either of the latter two can effectively be overridden by the issuer. The flow chart in Appendix II illustrates the manner in which a home member state may be selected.

The regulations are ambiguous in the context of a public offer made simultaneously in a number of member states or where securities are admitted to trading on a regulated market at the end of the public-offer period—this suggests that an issuer could still choose, but this would need to be reviewed on a case-by-case basis. For the purpose of determining whether a “public offer” has been made, the relevant rules are the ones that were in force in the relevant state at the time the offer was made.

Non-EEA issuers already listed on a regulated market are also required to elect their home member states, by notice in writing to the relevant competent authority. Whilst the market view is that the home member states of such issuers will be the states in which they are listed, given the ambiguity in the definition, non-EEA issuers do need to ensure that they have made valid elections in this regard.

The determination of a home member state for a non-EEA issuer is permanent and cannot subsequently be changed by the issuer. In addition to its implications under the Prospectus Directive, the member state selected will generally be the issuer’s home member state for the purposes of the Transparency Directive, which was implemented in member states on 20 January 200739.

Both EEA and non-EEA issuers of debt with a denomination equal to, or greater than, €1,000 (or a near equivalent in another currency) and most derivatives (unless the underlying securities belong to the issuer’s group) still have a free choice of home member state on an issue-by-issue basis. This means that an issuer may have several home member states: one governing all issues of equity and low-denomination debt, and different ones for individual debt issues.

Under the Proposed Prospectus Regulation, a third country issuer will also be required to designate a representative established in its chosen home member state (subject to and supervised by EU financial services regulation) as a contact point for the national competent authority. This requirement is similar to the existing requirement for a sponsor in a premium listing on the Main Market.

Transfer of Approval

As a general rule, it will always be the competent authority in the issuer’s home member state approving the prospectus. However, there may be circumstances where the competent authority of another member state is better placed to approve it (e.g., where the public offer is being undertaken in another member state or where the issuer is applying for admission on a regulated market in another member state). Both competent authorities in question (the transferor and transferee) must agree to the transfer. The FCA has indicated that it would agree to a transfer only if, in all the circumstances, it considers such transfer to be in the best interests of investors.

If the issuer’s home member state is the UK, the procedure for seeking a transfer from the FCA to another competent authority is as follows:

- the person making the request must do so in writing to the FCA at least 10 working days before the date the transfer is sought;

- the request must:
  • set out the reasons for the proposed transfer;
  • state the name of the competent authority to whom the transfer is sought; and
  • include a copy of the draft prospectus for which application is sought for transfer of the approval to another member state;  

- the FCA will consider transferring the function of approving a prospectus to the competent authority of another EEA State:
  • if requested to do so by the issuer, offeror or person seeking admission or by another competent authority; or
  • in other cases if the FCA considers it would be more appropriate for another competent authority to perform that function.

In practice, if a transfer to another competent authority is to be sought, issuers and their advisers would be well advised to contact the FCA and the other relevant competent authority at the earliest possible stage, but in our experience, a transfer from one competent authority to another is extremely rare. The FCA has stated that it is likely to look more favourably upon a transfer request where the issuer can demonstrate that it does not have any of its securities listed in the UK, is not making the offer in the UK and has most of its shareholders outside the UK. However, in circumstances where the FCA has a clear regulatory interest, such as an issuer listed in the UK with a large UK shareholder base, it is less likely to agree to a transfer.

Passporting

The Prospectus Rules provide the ability to “passport” prospectuses on a pan-European basis, making it easier for issuers to raise capital across Europe.

i. “Passport” from the UK +
Any issuer wishing to “passport” a prospectus approved in the UK by the FCA to other member states should comply with the following:

 - the prospectus must be prepared in accordance with the Prospectus Rules and must be vetted by the FCA in the normal way; and
 - in order to make a public offer in another member state, the FCA will need to send that member state the following (the “Required Information”):
  • a certificate of approval;
  • a copy of the prospectus as approved; and
  • a summary of the prospectus, including a translation where required by the competent authority of the relevant Host State.

A request to the FCA to supply the Required Information to the competent authority in the proposed Host State can be submitted either at the time the draft prospectus is submitted for approval by the FCA or subsequently (bearing in mind that a prospectus is, in principle, valid for a period of 12 months from approval). The request must be made in writing on a Form B and must include:

  • the relevant prospectus as approved; and
  • a translation of the summary if required by the competent authority of the relevant Host State.

The FCA must provide the Required Information to the competent authority of the relevant Host State:

  • within one working day of the date of approval of the prospectus if the request is submitted together with a draft prospectus for approval; or
  • within three working days beginning on the date of the request.

The FCA will inform the applicant as soon as practicable after it has supplied the Required Information to the competent authority of the relevant Host State, and the relevant public offer in that state can then be made. Under the Amending Directive, the FCA will be obliged to notify the applicant at the same time as the relevant Host State.

The procedure whereby the securities are to be admitted to trading on a regulated market of another member state will be the same as above, but the issuer will have to comply with any additional requirements relating to the admission of securities to trading on the relevant market.

ii. “Passport” to the UK +
Any issuer wishing to “passport” a prospectus approved in another member state into the UK (for the purposes of making a public offer or seeking admission to trading on a regulated market) should comply with the following requirements:

  • the issuer must prepare a prospectus and have it approved by the competent authority of its home member state in accordance with the rules of that competent authority; and
  • the competent authority of the home member state should then provide the FCA with the Required Information, and the FCA will, as soon as practicable:
  • inform the issuer, offeror or person seeking admission that it has received the Required Information; and
  • publish the Required Information on its website.

The relevant issuer will then be able to offer securities to the public in the UK. If the issuer also wishes to apply for admission of the securities to trading on a regulated market, then in addition to the above, it should be required to follow the procedures set out in the Listing Rules for admission to listing of securities of the relevant type. (See Chapter 2 for further details.)

iii. Liability +
Issuers wishing to take advantage of the pan-European “passporting” opportunities offered by the Prospectus Rules should bear in mind that the Prospectus Directive has not harmonised prospectus liability across Europe. This means that an issuer that has passported a prospectus in more than one member state will be subject, in relation to the prospectus, to the liability regime of each member state in which the prospectus is passported and so should take advice accordingly.
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