Under the Prospectus Rules (PR 1.2.1) and section 85 of the Financial Services and Markets Act 2000 ("FSMA"), a "prospectus" is required, subject to certain exemptions, if an issuer:
offers "transferable securities" to the public in the UK; or
seeks the admission of "transferable securities" to trading on a regulated market in the UK (the Main Market is a regulated market for these purposes12).
"Transferable securities" for these purposes encompass most transferable securities and include shares; securities equivalent to shares in companies; bonds and other forms of securitised debt; and any other securities that are nego-tiable on the capital market.
Certain securities, such as government securities, units in an open-ended investment scheme and (for the purposes of the "offer to the public" regime) securities included in an offer where the total con-sideration is less than €5.0 million13, are excluded from the scope of the Prospectus Directive14.
Furthermore, the European Commission has taken the view that most options granted under employee benefit schemes will not be "transferable securities".
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In addition, the current view is that loan notes issued on takeovers will generally not be caught by the regime, as long as the terms of the loan notes state that they are not transferable (or limit transfer rights to family members and trusts).
The available exemptions from the requirement to publish a prospectus are described in detail in Chapter 7 of this Guide.
However, these exemptions are typically relevant only in determining whether an offer is being made to the public and thus apply primarily to issues of securities by companies not listed on regulated markets (e.g., AIM com-panies) or further issues of securities by companies already listed on the Main Market. A prospectus will generally be required on every premium listing of equity securities on the Main Market.
Initial Public Offering (IPO) Process
The flow chart in Appendix I further illus-trates the decision-making process for whether a prospectus is required.
The prospectus is the central document to an issuer’s listing process and is the -document on the basis of which in-vestors will invest. In addition to being the principal selling -document for the offering, the prospectus helps the FCA to assess the suitability of the applicant for admission to listing.
The form and contents of a prospectus are prescribed by the Prospectus Rules and FSMA.
In addition to complying with the specific content requirements, a prospectus must satisfy a general duty to disclose all information necessary to enable investors to make an informed assessment of the assets and liabilities; financial position; profits, losses and prospects of the issuer; and the rights attaching to the securities in question (PR 2.1.1 and section 87A of FSMA). Further details of the content requirements applicable to a prospectus are set out in Chapter 3 of this Guide.
Under Chapter 4 of the Listing Rules, "listing particulars" are required in the case of an -application of specialist secu-rities (including those listed in Part 1 of Schedule 11A to FSMA) that do not require the publication of a prospectus.
In order to preserve the flexibility of its debt capital markets, the London Stock Exchange established a listed, but -unregulated, -market for issuers of debt and specialist securities (e.g., Eurobonds and depositary receipts), known as the "Professional Securities Market" ("PSM").
As it is not a regulated market, the prospectus regime will apply only to securities admitted to trading on the PSM in the context of offers to the public of such securities.
As most debt and specialist -securities are issued only to sophisticated investors, and hence will not constitute "offers to the public" under the available exemptions contained in the Prospectus Rules, the requirement to produce a prospectus will very rarely apply to issues of these securities in practice. However, under the Listing Rules (Chapter 4), issuers of these specialist securities would still need to publish listing particulars and have these approved by the FCA.
In the limited cases to which "listing particulars" are relevant, they will effectively contain information equivalent to that which would have been included in a prospectus, although the level of disclosure is not generally as extensive as would be required for a full prospectus in respect of equity securities.