UK Public Offers and Admissions to Trading Regime – FCA Consultation on Facilitating Retail Offers and Issuance of Low-Denomination Bonds
05 February 2025
On 31 January 2025, the FCA published a consultation paper (CP25/2) on further changes it proposes to the public offers and admissions to trading regime and to the UK Listing Rules (UKLR). This follows on from the consultation paper (CP24/12) published in July 2024 on the new prospectus rules the FCA proposes to make under the Public Offers and Admissions to Trading Regulations 2024 (the POATRs).
These proposed new rules, together with the POATRs, will effectively replace the current UK Prospectus Regulation regime. In our July 2024 briefing, we highlighted the principal changes that the proposed new rules will make to the format and contents of prospectuses and the circumstances in which they are used for issues of non-equity securities. In this briefing, we focus on the FCA's latest proposals concerning non-equity securities and in particular low denomination securities and the accessibility of corporate bonds to retail investors.
Key points
Single disclosure standard for non-equity securities: the prospectus rules which currently require certain limited additional disclosures for low denomination (ie a denomination of less than EUR 100,000) non-equity securities will be removed so that only the current wholesale standard will apply.
Non-complex listed corporate bonds: a new category of non-complex listed corporate bonds issued by a UK share-listed company (not a bank) will be recognised, which recognition will clarify the treatment of such bonds as ‘simple’ for the purposes of PROD and will allow for certain other reliefs.
Prospectus must be published prior to the start of a public offer which is conditional on admission to trading: in order to invoke the exemption for a public offer which is conditional on the admission of the securities to trading on a UK regulated market or primary MTF, a prospectus must be made available to the public in accordance with the PRM rules before that offer is made.
Removal of prospectus summary requirement for listings: a summary will not be required for any prospectus which relates to the admission to trading on a regulated market of non-equity securities (though no change in respect of final terms used for listing purposes).
More flexible accounting standards: historical financial information prepared in accordance with the issuer’s (or guarantor's) national law and accounting standards will be acceptable in a prospectus.
More flexible incorporation by reference rules: the PRM rules will permit information to be incorporated by reference into a prospectus from prospectuses approved by the FCA under the UK or EU Prospectus Regulation or the Prospectus Directive or approved before 31 December 2020 by an EU competent authority under the EU Prospectus Regulation or the Prospectus Directive.
Timing: the deadline for responses is 14 March 2025. The FCA plans to publish final rules in summer 2025 with a view to the new regime coming fully into force in January 2026.
Single disclosure standard for non-equity securities
The FCA proposes the elimination of separate disclosure Annexes in the Prospectus Rules: Admission to Trading on a Regulated Market sourcebook (PRM) for prospectuses describing retail securities and those describing wholesale securities, and their replacement with single Annexes which reflect the current wholesale standard. The earlier proposals in CP 24/12 to retain additional items in the registration document and securities note Annexes which would apply only in the case of retail securities have been dropped in this latest consultation. In practice, this change may not be particularly meaningful for the majority of issuers given that, on the whole, the differences between the retail and wholesale regimes are fairly marginal.
Of course legal liability for complete and accurate disclosure rests with those responsible for the prospectus, not the FCA, and the overall requirement is set by Regulation 23 of the POATRs (not the PRM Annexes). This requires a prospectus to contain the necessary information which is material to an investor for making an informed assessment of the assets and liabilities, profits and losses, financial position and prospects of the issuer and the rights attaching to the securities. It remains to be seen whether, notwithstanding the PRM Annexes, issuers of securities targeted at retail investors take a more cautious view of this standard than issuers of securities targeted exclusively at professional investors.
As under the current UK Prospectus Regulation regime, the POATRs regime will retain additional disclosure requirements in the PRM Annexes for securities with more complex features, such as asset backed securities and securities related to underlying assets.
Non-complex listed corporate bonds
As a complement to the single disclosure standard, the FCA proposes a new concept of non-complex listed corporate bonds. Paradoxically, the definition of a non-complex listed corporate bond is anything but non-complex. However, the broad concept is that there can exist a category of plain vanilla debt securities issued by a company (not a bank) which has its shares admitted to trading on a UK regulated market and which can be appropriate for distribution to retail investors. Such companies may also use wholly-owned subsidiaries to issue such securities.
The FCA proposes to clarify that non-complex listed corporate bonds are an example of the type of financial instruments that would ordinarily be regarded as ‘simple’ for the purposes of the FCA's product governance regime (PROD) and are therefore likely to be compatible with the needs and characteristics of customers in the mass retail market and appropriate for distribution by way of a wide range of channels.
The FCA also proposes to extend the current exemption from the annual and half-yearly financial reporting requirements in DTR 4.4 to non-complex listed corporate bonds. Currently the exemption extends only to an issuer whose only securities admitted to trading on a UK regulated market are debt securities having denomination of at least EUR 100,000 (or an equivalent). The FCA proposes to extend this exemption to an issuer whose only securities admitted to trading on a UK regulated market are non-complex listed corporate bonds, or a combination of both of these types of securities. This will enable finance subsidiaries of companies whose shares are admitted t trading on a UK regulated market to take advantage of this exemption when issuing non-complex listed corporate bonds of whatever denomination.
For completeness the FCA adds that by virtue of the definition of “retail market business” in its Handbook Glossary, certain activities, including underwriting activities, in relation to financial instruments are exempt from the Consumer Duty and that in its view non-complex listed corporate bonds would fall within this existing exemption.
Prospectus must be published prior to the start of a public offer which is conditional on admission to trading
Under the POATRs regime, one of the exemptions from the general prohibition of offers of securities to the public in the UK is where the offer is conditional on the admission of the securities to trading on a UK regulated market or primary MTF. The current consultation clarifies that in order to invoke this exemption, a prospectus must be made available to the public in accordance with the PRM rules before that offer is made.
Removal of prospectus summary requirement for listings
In its July 2024 consultation the FCA proposed retaining the current UK Prospectus Regulation regime for prospectus summaries in prospectuses and base prospectuses relating to non-equity securities. The current consultation proposes to amend this by providing that a summary is not required for any prospectus which relates to the admission to trading on a regulated market of non-equity securities (regardless of the denomination of such non-equity securities). This will be welcomed by market participants, though we note that the consultation is silent on the removal of the requirement for a final terms to have annexed to it a summary of the individual issue. It seems odd to require the summary under a final terms when an equivalent offering under a stand-alone prospectus would not require a summary - this may simply be an oversight in the consultation.
More flexible accounting standards
The FCA's July 2024 consultation proposed carrying forward the current UK Prospectus Regulation regime requirements concerning acceptable accounting standards for historical financial information appearing in prospectuses. For a prospectus relating to non-equity securities the current consultation proposes simplifying this to provide that if the historical financial information is not prepared in accordance with one of the expressly prescribed accounting standards it will still be acceptable if it is prepared in accordance with the issuer’s (or guarantor's) national law and, in all material respects, with national accounting standards.
More flexible incorporation by reference rules
The PRM rules proposed by the FCA in July 2024 essentially retain the current UK Prospectus Regulation regime provisions concerning incorporating information by reference into a prospectus. In particular the information to be incorporated must appear in one of the categories of documents listed in PRM 5.1.1 R(3). In response to comments that this list of documents did not contain many previously approved prospectuses, the FCA proposes adding to this list prospectuses or other documents:
approved by the FCA under the UK or EU Prospectus Regulation or the Prospectus Directive; or
approved before 31 December 2020 by an EU competent authority under the EU Prospectus Regulation or the Prospectus Directive.
Further simplifications of further issuances
Currently an issuer must make a listing application to the FCA each time it seeks to admit a new class of securities to the Official List and it must make further listing applications every time it issues more securities of the same class. The FCA now proposes to remove the further issuance listing application process entirely from the UKLR. Under the new regime, an issuer would only make a single application to list all securities of the class and the FCA would treat further issuances of the same class as automatically listed when the securities are formally issued.
Farewell to Listing Particulars and the PSM
The FCA proposes to remove Listing Particulars as an admission document and to close the London Stock Exchange's Professional Securities Market (PSM) to new admissions at the point the new POATRs regime comes into force. This is because the concept of Listing Particulars is inconsistent with the new POATRs regime and the historically low levels of new issuances relying on Listing Particulars do not, in the FCA's view, justify retention of Listing Particulars as an admission document. The proposals also contain transitional provisions for issuers which continue to have their securities or programmes admitted to trading on the PSM.
Clarification on Consumer Composite Investments (CCIs)
Separately the FCA is working to replace the UK PRIIPs Regulation regime with a new regime for CCIs (see FCA consultation paper CP 24/30 and this Ashurst briefing). The current consultation CP 25/2 states that non-complex listed corporate bonds will not be regarded as CCIs. This seems a reasonable conclusion, but since the introduction of the PRIIPs regime many corporate issuers have avoided questions of whether or not they need to produce key information documents (KIDs) by restricting the offering of their securities to professional investors only. It remains to be seen whether this new category of non-complex listed corporate bonds will tempt them back to the retail market or whether the risk of having to produce a "product summary" under the CCI regime (the equivalent of a KID) will keep them away from the retail market.
Next steps
The deadline for responses to this consultation is 14 March 2025. The FCA plans to publish final rules for the whole POATRs regime in summer 2025 with a view to the new regime coming fully into force in January 2026.
