Further issuances of equity on regulated markets – Engagement Paper 2

The Financial Conduct Authority (FCA) has published a so-called Engagement Paper in which the FCA seeks comments on how to go about prospectus requirements for further issuances of equity securities (subsequent issues of an already issued security). The engagement paper is part of a series of documents the FCA is publishing in an effort to establish a „new“ UK prospectus regime which the regulator will be entitled to deliver following the implementation of the Draft: Financial Services and Markets Act 2000 (Public Offers and Admissions to Trading) Regulations 2023. Latter is expected to come into force once the Financial Services and Markets Bill is passed by UK Parliament. According to the draft regulations, the FCA will be responsible for setting out admission rules, including rules on the format, content, and design of a prospectus, thereby eliminating the currently Retained EU Prospectus Regulation.
In this engagement paper now, the FCA seeks views on the prospectus requirements for subsequent stock issues under the „new“ regime with the main goal of fostering capital raising activities and reducing the burdens of issuers while maintaining a high level of investor protection. Therefore, the FCA seeks feedback on some fundamental questions in this context, including the following:
– Do respondents agree with these objectives of the FCA, particularly with the focus on reducing burdens for issuers?
– Do the current prospectus requirements for subsequent issuances impose undue burdens and do they prevent capital formation?
– Should the FCA set a threshold beyond which a prospectus would be required? And if so, how high should the threshold be?
– What alternative documents should or could be provided for subsequent equity issues, particularly in case the threshold isn’t met (e.g. cleansing notice only, simplified prospectus)?
– Should there be a different treatment for equity fund shares and / or for closed-end funds?
– Should the FCA set restrictions, e.g. based on how long ago the „original“ issue took place?
– How should the FCA go about pre-emption and disclosures in this context?
The FCA thereby asks respondents to consider the effects of a change in the current requirements on retail investors (do they have enough information to make informed decisions, how will they find out about an upcoming issuance) and on issuers also or subsequently seeking issuance in another jurisdiction (do they have to produce prospectuses for other jurisdictions).
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The comment period will be open up to September 29, 2023.