Protected forward-looking statements – Engagement Paper 3

The Financial Conduct Authority (FCA) has published a so-called Engagement Paper in which the FCA seeks comments on the inclusion of a so-called Protected Forward-Looking Statement (PFLS) in the prospectus of an issuer. A PFLS allows an issuer to disclose valuable forward-looking information for which the issuer cannot be held liable and thus encourages the disclosure of information the issuer would otherwise not make.
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 (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 the design and content of a PFLF, the delineation to the already required forward-looking information in prospectuses, and other related issues. Specifically, it seeks comments on the following issues:
– Should the inclusion of a PFLS be voluntary as proposed by the FCA?
– Are there parts of the current prospectus forward-looking information that should be moved into the PFLS to benefit both investors and issuers themselves (e.g. profit forecasts of those issuers that are obliged to publish such)?
– How prescriptive should the PFLS be? Should the FCA provide examples of information to be disclosed in PFLS or should it even specify the exact content?
– How useful would a PFLS be for disclosure of forward-looking information relating to sustainability other than the information that MUST be disclosed in a prospectus (e.g. key performance indicators)?
Additionally, the FCA seeks comments on its proposed approach for the inclusion of PFLS in a prospectus which is as follows:
(1) A PFLS should be accompanied by a statement that clearly identifies a PFLS as such and makes a disclaimer as to the different liability standards that apply to the PFLS. The „disclaimer“ should also explicitly emphasize the uncertainty surrounding the accuracy of the forward-looking statement and describe any significant factors that could affect its accuracy.
(2) The FCA considers two options for incorporating PFLS in a prospectus: The first option is to include it within the general content of the prospectus, with each PFLS accompanied by a disclaimer. The second option is to have a separate and clearly labeled section dedicated to PFLS in the prospectus. The decision on which approach to use would be made by the persons responsible for the preparation of the prospectus.
(3) The FCA suggests that any key assumptions or inputs used to create the forward-looking statement should be disclosed in the accompanying statement. Additionally, the FCA considers the need for an explanation of the relationship between PFLS and mandatory disclosures, if a PFLS is used so as to ensure consistency between the information provided in either one.