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Developments in the London listing markets: PISCES and new UK prospectus regime12 February 2025

In this third article, we focus on the latest developments in relation to the new Private Intermittent Securities and Capital Exchange System (“PISCES”) for unlisted shares and the new UK prospectus and public offers regime.

"PISCES is a new type of regulated trading platform that will facilitate the intermittent trading of existing shares in private companies on a multilateral system."

Our previous articles in relation to developments in the London listing markets can be found here.

New PISCES trading platform

On 14 November 2024, the UK Chancellor of the Exchequer delivered the inaugural Mansion House speech, announcing a commitment to establish PISCES by May 2025.

What is PISCES?

PISCES is a new type of regulated trading platform that will facilitate the intermittent trading of existing shares in private companies on a multilateral system. PISCES is expected to improve the growth of private companies in the UK by providing periodic liquidity in their shares, whilst also bridging the gap between private and public markets by enabling companies to engage in transactions using a regulated public trading market. It is seen as a potential stepping stone to listing on public markets.

It is anticipated that PISCES will incorporate elements from public markets, such as multilateral trading and private markets, including greater discretion in respect of how company disclosures are distributed and when trading can take place.

HM Treasury response and PISCES Regulations

On 15 November 2024, HM Treasury published its response to its earlier March 2024 consultation, together with draft legislation to establish PISCES (the “PISCES Regulations”) and an accompanying policy note to assist stakeholders in reviewing the PISCES Regulations.

Key features

Following HM Treasury’s consideration of the consultation feedback, PISCES will include the following key features:

  • secondary market – PISCES will operate as a secondary market, which facilitates the trading of existing shares in intermittent trading windows (e.g. ad hoc, quarterly, biannually, yearly etc.) and will not facilitate capital raising through the issuance of new shares;
  • unlisted shares – only shares in companies whose shares are not admitted to trading on a public market (in the UK or abroad) can be traded on PISCES. This includes UK private and public limited companies and overseas companies. PISCES operators will determine any admission requirements for their markets, including any minimum corporate governance requirements;
  • institutional investors – only institutional investors, employees of participating companies and investors who can meet the definition of high net-worth individuals and self-certified or certified sophisticated investors under the financial promotion legislation will be able to purchase shares on PISCES;
  • market abuse regime – following feedback, the PISCES regime will not include a public market style market abuse regime. This is a change to what was proposed in the consultation. Instead, the Financial Conduct Authority (“FCA”) will be given rule-making powers to create a disclosure regime for PISCES which would require disclosures and pre- and post-trade transparency to be shared with all investors participating in a PISCES trading event. However, this will not be required to be made public;
  • transaction reporting – as there is no market abuse regime, there will also not be transaction reporting requirements for PISCES. Instead, the FCA will consider whether to set rules relating to record-keeping requirements to support their supervision of the PISCES market;
  • share buybacks – companies will not be able to carry out share buybacks on PISCES initially. However, given the feedback HM Treasury has received, it will explore whether to allow this at a later stage following launch;
  • exemption from stamp duty and stamp duty reserve tax – it was confirmed in the Autumn Budget 2024 that PISCES transactions will be exempt in the same way as growth markets such as AIM and Aquis growth market; and
  • FCA approval – firms wishing to operate a PISCES platform will need to seek FCA approval.

"PISCES operators will determine any admission requirements for their markets, including any minimum corporate governance requirements."

FCA consultation

On 17 December 2024, the FCA published consultation paper CP24/29 which sets out the FCA’s proposed framework to implement and oversee the operation of the PISCES sandbox (a space designed to experiment, learn and test financial market infrastructure), which is expected to run for five years. If PISCES is deemed successful, HM Treasury will consider making it a permanent feature of the UK regulatory regime.

The PISCES Regulations propose that the FCA is given broad powers to make rules to implement and operate the PISCES sandbox arrangements, including powers to both modify the application of, or disapply, existing rules or technical standards and impose new requirements relating to:

  • company disclosures to potential investors;
  • preventing and detecting abusive trading practices; and
  • promoting, distributing and marketing shares admitted to a PISCES platform.
Disclosure arrangements

Notably, Chapter 3 of the consultation paper outlines the FCA’s proposals for the rules and arrangements for PISCES companies disclosing information, following confirmation from HM Treasury that the regulatory framework for PISCES should include a new and bespoke disclosure regime for PISCES companies, as set out below:

  • core disclosures – the FCA proposes that PISCES operators be obliged to include a requirement that companies disclose a set of core information in their rules, which is a standardised list of information that investors would typically expect to receive in a private market transaction;
  • omissions of core disclosures – the proposed rules will require PISCES operators to allow PISCES companies not to provide core disclosure information if they give a legitimate explanation in their disclosure for any omission of core information (such as where a PISCES company does not have access to the information, or the disclosure would likely prejudice the legitimate interests of the PISCES company);
  • presentation of disclosures – company disclosures should be made available in an easily analysable, concise, and comprehensible form; and
  • timing – PISCES operators should ensure disclosures and other regulated information are made available to all investors participating in a particular trading event at the same time, until the end of the trading event. Disclosures will not have to be made public as they would under the UK market abuse regime.

"If PISCES is deemed successful, HM Treasury will consider making it a permanent feature of the UK regulatory regime."

The consultation paper also contains the draft PISCES Sourcebook at Appendix 1, which sets out new rules and guidance for PISCES, as well as chapters relating to: (i) organising and running trading events (Chapter 4); (ii) market manipulation and oversight (Chapter 5); (iii) the FCA’s approach to operating the PISCES sandbox and application requirements (Chapter 6); (iv) trading intermediary requirements: promotion and distribution (Chapter 7); (v) modified application of FCA handbook rules and guidance (Chapter 8); and (vi) fees (Chapter 9).

Next steps and commentary

Feedback on the PISCES Regulations was requested by 9 January 2025 and, subject to the feedback received, the current plan is for HM Treasury to implement PISCES by May 2025. Responses to the consultation should be submitted by 17 February 2025. The FCA will then publish final rules after HM Treasury has laid the final PISCES Regulations before Parliament, which is expected to be by May 2025. The FCA will publish further information in early 2025 about pre-application engagement opportunities for firms interested in applying to be a PISCES operator.

PISCES represents a significant step in the UK government’s efforts to reinvigorate the London listing markets and is proposed to be a means to give stakeholders greater liquidity options that are not centred on traditional listings on a public market or M&A transactions. For investors, it provides more opportunities to invest in growth companies, allowing them to share in their returns. For companies, it should make it easier to raise funds privately outside of PISCES as the availability of a regulated secondary market should encourage investors to trade with the potential to subsequently investing further.

New UK prospectus and public offers regime

The Public Offers and Admissions to Trading Regulations 2024 (“POATRs”), which were made in January 2024, introduce the framework for a new regime for the making of offers of securities to the public and the admission of securities to trading to replace the current EU-derived prospectus regime.

These will only come into full effect once the FCA has finalised detailed rules for the new regime. To this end, the FCA initially published two consultation papers in July 2024 (CP24/12 and CP24/13). These set out proposed rules for companies seeking to admit securities to a UK regulated market or ‘primary’ multilateral trading facility (“MTF”) and for the new public offer platform (“POP”) regime, respectively. These closed on 18 October 2024 and, on 31 January 2025, the FCA published two new consultations (CP25/2 and CP25/3) which supplement the initial consultations with, amongst other things, proposed transitional provisions. These close on 14 March. The FCA aims to finalise its rules in summer 2025 with the new rules (including the POP regime) taking effect, subject to HM Treasury approval, in January 2026.

Under the current regime, securities may only be offered to the public in the UK or admitted to trading on a regulated market in the UK following publication of a prospectus unless an exemption applies. By contrast, the POATRs differentiate the regime for admissions to trading and the regime for the making of public offers. Whereas a prospectus may still be required for admissions to trading, the POATRs generally prohibit the making of public offers unless an exemption applies. These include: (i) offers made through a POP; and (ii) offers where the total consideration in the UK does not exceed £5m over a 12-month period, as well as several key exemptions retained from the current regime.

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"The FCA aims to finalise its rules in summer 2025 with the new rules (including the POP regime) taking effect, subject to HM Treasury approval, in January 2026."

In this article, we focus on two noteworthy proposals included in the consultations: (i) the introduction of admission prospectuses for primary MTFs; and (ii) proposed rules for the new regulated activity of operating a POP.

Admission prospectuses for MTFs

Primary MTFs will continue to establish their own rules and criteria for admissions, but the POATRs grant the FCA the power to oblige certain primary MTFs (those not restricted to qualified investors, including AIM) to require publication of an admission prospectus in certain circumstances. The FCA proposes requiring an admission prospectus for all initial admissions to trading (even where there is no fundraising) and for the admission of enlarged entities resulting from a reverse takeover but is proposing an exception for expedited admission procedures such as the AIM Designated Market Route. Primary MTFs can voluntarily opt to introduce this requirement in other situations.

It will be up to primary MTF operators themselves to determine the detailed content requirements for such prospectuses as well as the process for verification and publication. However, these must comply with the “necessary information” test detailed in the POATRs, which largely mirrors the test under the existing rules. They will also be subject to the same statutory responsibility and compensation provisions as apply to prospectuses.

The consultation paper CP24/12 proposes certain changes to the content requirements for prospectuses. One change concerns the liability threshold for forward-looking statements, which is currently negligence-based; a standard that understandably deters issuers from including forward-looking statements, such as profit forecasts, in prospectuses and, consequently, shields from investors information about the issuer that is key for assessing the risks, returns, and viability of their potential investment. Recognising the value of such statements, and with the goal of encouraging issuers to voluntarily include them in prospectuses, the FCA proposes heightening the liability threshold to one that is dishonesty/recklessness-based for certain categories of statements called “protected forward-looking statements” (“PFLS”), including those contained in primary MTF prospectuses.

The FCA is proposing to specify the kinds of statements that can be PFLS through a general definition, specific criteria depending on whether the PFLS is financial or operational, and certain exclusions. The general definition will include several criteria, including that the PFLS can relate only to future events or circumstances and limits statements to those which are likely to be useful to investors by incorporating a reasonable investor test (a process familiar to issuers who routinely apply this test to ensure compliance with their continuing disclosure obligations e.g. under the Market Abuse Regulation). PFLS should be clearly identified in a prospectus and investors provided with the information they need to determine the extent to which they want to rely on these. Both general and specific accompanying statements will be required.

"The FCA proposes requiring an admission prospectus for all initial admissions to trading (even where there is no fundraising) and for the admission of enlarged entities resulting from a reverse takeover."

POPs

In the consultation paper CP24/13, the FCA proposed rules to apply to firms that have obtained the requisite authorisation to operate a POP, a platform designed to facilitate companies making public offers of securities to investors outside public markets when raising more than £5m.

The FCA aims to enable earlier-stage and smaller companies to raise capital efficiently and effectively, from a broader investor base, free from the burden of having to comply with disproportionate requirements. Concurrently, recognising that companies offering securities via a POP are likely to have limited track records and pose a greater risk of having less detailed information, the FCA’s rules seek to ensure that investors receive appropriate protection against fraudulent offers and sufficient information on legitimate securities.

The main proposals include:

  • a requirement that POP operators carry out due diligence on issuers to assess their suitability and ensure investors are afforded sufficient and accurate information to make informed decisions as to the viability of their investments;
  • issuers will need to disclose information related to the public offer itself, including the target amount, the rights attaching to the securities, and any tax reliefs available to investors. Also, other information, including ownership and management structures, financial position, material contracts and key risk factors, including any pending or likely litigation;
  • the POP operator will need to verify these disclosures to a blanket standard of reasonableness and satisfy itself as to the creditworthiness of the issuer, before providing a disclosure summary to investors; and
  • consultation paper CP25/3 deals with authorisation and supervision of firms seeking to operate POPs and proposes amendments to the Perimeter Guidance Manual to provide guidance to assist firms to identify the permissions they are likely to require when involved in facilitating offers of securities to the public.

"...a platform designed to facilitate companies making public offers of securities to investors outside public markets when raising more than £5m."

For offers for an amount of £5m or below (or made using any other exemption in the POATRs such as to qualified investors), these can be made via a POP but will not be subject to the same regulatory treatment and must carry a risk warning clarifying this.

Commentary

The new regime aims to strike a sustainable balance between providing investors with the information they need to make investment decisions and placing no more than proportionate obligations on companies working to raise capital.

Conclusion

The developments outlined here are part of a package of measures designed to help strengthen the UK’s capital markets and position the UK as a global and vibrant financial centre and, as such, are welcome. In addition, in January, two new members were appointed to the Capital Markets Industry Taskforce (founded in 2022 in consultation with government to help drive reform of UK capital markets), to champion the cause of smaller growth and quoted/listed companies in that process. We look forward to seeing these and other initiatives reinvigorate the UK’s capital growth markets across the board.

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