Non-equity securities – Engagement Paper 4

The Financial Conduct Authority (FCA) has published a so-called Engagement Paper in which the FCA seeks comments on ways to improve the current admission and prospectus framework for non-equity securities in an effort to encourage listing in UK and increase access to listings by investors.
The engagement paper is the last one in 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 (along an outlined framework) following the implementation of the Draft: Financial Services and Markets Act 2000 (Public Offers and Admissions to Trading) Regulations 2023 (POAT). 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 possible improvements to the current prospectus regime for non-equity securities that will be helpful when drafting new admission rules. Among others, the FCA would like to find out
– the market’s perception of the current prospectus regime for non-equity securities (is it working well, where could improvements be made?)
– views on a potential removal of the currently existing dual disclosure standards for wholesale and / versus retail issuances in non-equity prospectuses. The new disclosure standard would be based upon the existing wholesale standard, thereby eliminating many of the additional prospectus disclosure requirements for retail instruments (e.g. the summary, additional details on an issuer’s history and development, trends, details on the the offer to the public, etc.).
– views on a potential new scheme for „simple standardised unsubordinated unsecured corporate bonds“ that are accessible to a wide range of investors, both retail and wholesale. The scheme would thereby create a product that attracts institutional investors and retail investors alike. These bonds would be subject to more relaxed prospectus disclosure requirements and thus benefit both investors and issuers.
– views on possible improvements as regards the prospectus requirements of subsequent issues of non-equity securities such as an adjustment of the threshold (currently 20% of already issued securities within a 12 month period) that cannot be exceeded to be exempt from prospectus requirements or the adoption of relaxed prospectus requirements for issuers that also have equity securities listed in the market.
– views on possible new prospectus disclosure requirements pertaining to ESG bonds so that some of the information in the „bond frameworks documents (documents produced by issuers to set out in more detail their approach to ESG-labelled instruments)“ would be included in a prospectus of such bonds either by reference or by explicit description. Additionally, the FCA could require further disclosures, for instance on the selection criteria for projects the proceeds of ESG bonds will be used for.
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There are several other proposed measures outlined in the document that are intended to improve the current UK prospectus regime with the aim to encourage listing and increase access to listings of non-equity securities. To view those or details on the above noted proposals, please refer to the original legal document for more detailed, comprehensive information.