Where applicable, key changes to the current prospectus regime envisioned by the Proposed Prospectus Regulation have been noted throughout the course of this guide.
“Transferable securities” for these purposes encompass most transferable securities and include shares; securities equivalent to shares in companies; bonds and other forms of securitised debt; and any other securities that are negotiable on the capital market. Certain securities, such as government securities, units in an open-ended investment scheme and (for the purposes of the “offer to the public” regime) securities included in an offer where the total consideration is less than €5.0 million11, are excluded from the scope of the Prospectus Directive12. Furthermore, the European Commission has taken the view that most options granted under employee benefit schemes will not be “transferable securities”. In addition, the current view is that loan notes issued on takeovers will generally not be caught by the regime, as long as the terms of the loan notes state that they are not transferable (or limit transfer rights to family members and trusts).
The available exemptions from the requirement to publish a prospectus are described in detail in Chapter 7 of this Guide. However, these exemptions are typically relevant only in determining whether an offer is being made to the public and thus apply primarily to issues of securities by companies not listed on regulated markets (e.g., AIM companies) or further issues of securities by companies already listed on the Main Market. A prospectus will generally be required on every premium listing of equity securities on the Main Market.
The prospectus is the central document to an issuer’s listing process and is the document on the basis of which investors will invest. In addition to being the principal selling document for the offering, the prospectus helps the FCA to assess the suitability of the applicant for admission to listing.
The form and contents of a prospectus are prescribed by the Prospectus Rules and FSMA. In addition to complying with the specific content requirements, a prospectus must satisfy a general duty to disclose all information necessary to enable investors to make an informed assessment of the assets and liabilities; financial position; profits, losses and prospects of the issuer; and the rights attaching to the securities in question (PR 2.1.1 and section 87A of FSMA). Further details of the content requirements applicable to a prospectus are set out in Chapter 3 of this Guide.
Under Chapter 4 of the Listing Rules, “listing particulars” are required in the case of an application of specialist securities (including those listed in Part 1 of Schedule 11A to FSMA) that do not require the publication of a prospectus. In order to preserve the flexibility of its debt capital markets, the London Stock Exchange established a listed, but unregulated, market for issuers of debt and specialist securities (e.g., Eurobonds and depositary receipts), known as the “Professional Securities Market” (“PSM”). As it is not a regulated market, the prospectus regime will apply only to securities admitted to trading on the PSM in the context of offers to the public of such securities. As most debt and specialist securities are issued only to sophisticated investors, and hence will not constitute “offers to the public” under the available exemptions contained in the Prospectus Rules, the requirement to produce a prospectus will very rarely apply to issues of these securities in practice. However, under the Listing Rules (Chapter 4), issuers of these specialist securities would still need to publish listing particulars and have these approved by the FCA. In the limited cases to which “listing particulars” are relevant, they will effectively contain information equivalent to that which would have been included in a prospectus, although the level of disclosure is not generally as extensive as would be required for a full prospectus in respect of equity securities.
Before a prospectus may be published, it must be submitted to, and approved by, the FCA (PR 3.1.10). (See paragraph iii below for the approval requirements applicable to overseas issuers.) In the case of an IPO, the draft prospectus and related documents must be submitted to the FCA at least 20 business days prior to the intended approval date (PR 3.1.3) and must be substantially complete and annotated in the margin to indicate compliance with the relevant requirements of the Prospectus Rules.
Under the Proposed Prospectus Regulation, all drafts of a prospectus are required to be submitted in a searchable electronic format. The first draft submitted must be accompanied by a cross-reference list if so requested by the national competent authority. The prospectus must also be annotated in the margin and accompanied by a document setting out the provisions that are not applicable and where the order of information in the prospectus does not coincide with that set out in the Proposed Prospectus Regulation.
The Proposed Prospectus Regulation also envisages the development of a ‘central workflow system’ that will harmonise the approval process across the EU. ESMA, competent authorities and issuers will work together to manage and monitor the approval of the prospectus on an online system from submission to publication.
Under section 87A(1) of FSMA and PR 3.1.7, the FCA may not approve a prospectus unless it is satisfied that:
In the context of an IPO, the FCA is obliged to notify an issuer of its decision within 20 business days of the receipt of the application for approval. However, where the FCA finds that the documents submitted are incomplete or that further information is required, this time limit begins to run only upon submission of the complete information, so ensuring submission of a complete “first draft” to the FCA is key to minimising the approval timetable.
In the context of an IPO, once a prospectus has been approved by the FCA, it must be filed with the FCA at the same time it is made available to the public or, if earlier, within 24 hours of receipt by the company of the notification of the approval. The prospectus must be made available to the public as soon as practicable and in any event at a reasonable time in advance of or at the beginning of the offer, but in the case of an IPO, it must be made available to the public at least six business days prior to the end of the offer (PR 3.2.3). A prospectus may be made available to the public through:
The FCA has confirmed that the six-day rule does not apply where an issuer is seeking admission to the Main Market for the first time and raising funds only through an institutional placing, as there is no public offer in such circumstances14.
Under the Prospectus Directive, each issuer is allocated a “home member state”, which determines which authority in the EEA will be responsible for the approval of the relevant issuer’s prospectus. As mentioned above, once approved by the competent authority in the relevant EEA State, a prospectus may be used by the issuer for public offers and the admission of securities to trading on regulated markets throughout Europe.
For EEA issuers, the “home member state” is generally the state in which the issuer has its registered office15. As described in more detail in Chapter 4, the position of non-EEA issuers is somewhat more complex. For non-EEA issuers, the home member state will generally be either: (i) the member state in which a public offer of the issuer’s securities is or was first made after 31 December 200316; or (ii) the member state in which an application for admission of the issuer’s securities to trading on a regulated market is or was first made after 31 December 200317 (and where both limbs apply, the issuer may generally elect its home member state from the two relevant states). Where the home member state of an issuer is not the UK, the prospectus must generally be approved by the competent authority in the relevant member state, rather than the FCA, and then “passported” into the UK18. Even if the overseas issuer’s primary listing is being sought in the UK, its home member state’s regulator, rather than the FCA, will generally be charged with vetting the prospectus.
However, in the context of a Main Market IPO, even if the FCA is not the competent authority for the purposes of approving the prospectus, it will still be the relevant authority for the purposes of determining eligibility and approving the application for admission to the Main Market.
Whilst the Prospectus Directive has harmonised the European regulatory regime for raising capital, it does not seek to govern or administer the Main Market’s “gold standard” premium-listing requirements. A prospectus approved by the competent authority of another member state and “passported” into the UK is no guarantee that the issuer has satisfied the listing requirements applicable to the Main Market or that the application for a premium listing will be approved by the FCA. Accordingly, the FCA should be consulted at an early stage where an issuer seeking a listing on the Main Market has a home member state that is not the UK.
– acted with due care and skill in relation to the performance of “sponsor services”21;
– taken reasonable steps to satisfy itself that the directors of the issuer understand the nature and extent of their responsibilities and obligations under the Listing Rules and the DTR; and
– come to a reasonable opinion, on the basis of its professional experience and after having made due and careful enquiry, that:
The sponsor is also required to confirm that all matters known to it which, in its opinion, should be taken into account by the FCA in considering the application for admission to listing and in deciding whether the admission of the equity securities in question would be detrimental to investors’ interests have been disclosed with sufficient prominence in the prospectus or otherwise in writing to the FCA.
The documents required to obtain approval for a prospectus are detailed in paragraph A of Chapter 4, and in addition to these, the following documents will need to be submitted to the FCA in connection with the issuer’s application for a premium listing.
On a premium listing, a sponsor is required to submit a letter to the FCA setting out how the issuer in question satisfies the relevant eligibility criteria. This letter needs to be submitted no later than at the time of submission for approval of the first draft prospectus or, if the FCA is not approving the prospectus, at a time to be agreed with the FCA.
The sponsor’s declaration referred to in paragraph B above must be submitted either on the date the FCA is to consider the application for approval of the prospectus (and prior to the approval of the prospectus) or, if the FCA is not approving the prospectus, at a time to be agreed with the FCA.