5)1) The Prospectus Regulation Rules Flashcards
1.1 What is the purpose of a prospectus?
To give potential investors a complete, accurate and up-to-date understanding of the issuer, including its history, management, structure, finances, operations and prospects
1.1 When do the prospectus rules require the issue of a prospectus?
Whenever there is either:
1. an offer of transferable securities to the public in the UK
2. a request for the admission to trading of transferable securities on a regulated market in the UK
unless an exemption applies
A prospectus is not required for admission to AIM or the Aquis Exchange Growth Market unless it is a public offer (raising more than £8mill from 150 or more non-qualified investors), with an admission document being produced instead. This document is a financial promotion
1.1.1 What exemptions are available to the prospectus rules?
- when an offer is made only to qualified investors (QIs), or to fewer than 150 persons in the UK, excluding qualified investors; this is referred to as the private placement exemption
- for offers for securities within the UK for a total consideration of less than 8mill EUR calculated over a 12-month period
- for units/shares issued by an open-ended investment company (OEIC)
- for a bonus or capitalisation issue
- for non-equity securities issued by govt. authorities, central banks or local authorities (i.e., gilts or Treasury stoc issued by the DMO on behalf of HMT) of any country or territory that are unconditionally and irrevocably guaranteed
- for issues of money market instruments with maturities of less than 12 months
- for the exercise of conversion rights or warrants, when this represents less than 20% of the issued share capital in any 12-month period
- for shares issued in place of shares already listed, so long as the total nominal value does not increase as a results e.g a share split or consolidation
- with small issues of already-listed securities, which will not increase the class of securities in issue by 20% or more over a year
- with issues of wholesale securities i.e. if the min subscription or denomination of the securities is 100k EUR; this will only realistically apply to corporate bond issues
- small issues of less than 1mill EUR over a period of 12 months
- for securities already admitted to trading on one regulated market, which will not require a prospectus to seek admission to trading on additional markets, providing that they have a minimum trading history of more than 18 months
1.1.1 Who are Qualified Investors?
-professional clients
-eligible counterparties
1.2 What are the advantages of producing a prospectus?
A prospectus which has been approved by the FCA can be distributed widely, without restriction, in the UK
1.2 What are the advantages of not producing a prospectus?
Time, expense and complexity
1.3.1 Who is responsible for the preparation of the Prospectus?
Advisers should coordinate the preparation of the prospectus in connection with an offering
The duty for contents of the prospectus lies with the directors of the issuer
Directors must make a statement in the prospectus acknowledging their responsibility
They must confirm to the FCA, by signed letter, that the prospectus contains all relevant info that they know, or should have been aware of, as directors of the company
1.3.2 How far in advance must the sponsor (for premium listings) or other adviser (for standard listings) provide the FCA with certain stipulated info before the approval is granted?
At least 10 business days (20 days for new issuers or in complicated cases)
1.3.2 What are the main items to include on the info provided to the FCA? (ten-day document) (7)
- draft prospectus and cover, and copies of all documents referred to within them
- request for auth to omit info normally required under the rules
- application forms to acquire or subscribe for shares
- copies of docs containing info to be incorporated by reference in the prospectus
- checklists cross-referencing the draft prospectus contents to the prospectus requirements
- copies of the board resolution allotting the securities (or confirmation that it will be provided within three days of approval)
- the sponsor’s declaration on an application listing (premium listings only)
Sponsor or adviser to provide FCA with info above in final form, inc the final version of the prospectus, together with the relevant fee and Form A (Application for Approval of a Prospectus)
1.3.3 What information must a prospectus contain?
Info necessary for investors to make informed assessment of the company’s (“issuer”) assets and liabilities, financial position, profits and losses, prospects, any guarantor and the rights attaching to the transferable securities
There are three parts to the prospectus:
1. Summary containing a breakdown of key info, inc the risk factors
2. Registration document containing general info about the issue and the issuer
3. Securities note containing detailed info about the equity or non-equity securities being offered
If the company position changes after after approval of the prospectus, the FCA must be notified as soon as is practicable
After approval, the prospectus must be filed with the FCA and made available to the public
1.4 What new designated activities are included in the ‘Edinburgh Reform’ 2022?
- offering relevant securities to the public in the UK and communicating advertisements or other information in relation to such offers; these include transferable securities and other securities and investment products
- admitting, seeking or obtaining admission of transferable securities to a regulated market and communicating related adverts or disclosures
- admitting, seeking or obtaining admission of transferable securities on a primary MTF communicating related adverts of disclosures
- primary MTFs include AIM and other markets that impose obligations on traded issuers and are not merely secondary trading venues
1.4 Which areas can the FCA reshape when making their new rules of the Proposed New Public Offer Regime?
- whether or how to set prospectus requirements for companies seeking admission of their securities to trading on regulated markets
- whether or not to set prospectus requirement on issuers raising further capital on UK-regulated markets
- how issuers may include forward-looking information in prospectuses
- how we may approach setting prospectus requirements for issuers seeking to admit securities to junior markets (MTFs)
- what rules we should set for firms that choose to operate a public offer platform to allow companies to raise capital from investors without being admitted to a public market
