This summer saw a significant milestone in UK capital market reform, as the FCA published its new rules for the public offers and admissions to trading regime (POATRs). Established under UK law in 2024, the new regime establishes a framework for offering equity and non-equity securities to the public in the UK and their admission to trading on exchanges. This contrasts to the UK’s The Listing Rules, published in mid-2024 to replace previous rules, which govern the ongoing obligations for companies whose securities are already admitted to a regulated market.
Taken together, the new regulations represent the most significant set of reforms to the UK capital markets in a generation and seek to make the UK a more attractive place to raise capital through the reduction of regulatory cost and complexity and the removal of barriers to retail inclusion.
Rules relevant to treasurers
Set out in the FCA policy statements PS25/9 and PS25/10, the new POATR regime, separates the rules for public offers from those for admission to trading, which will appear in a new sourcebook, Prospectus Rules: Admission to Trading on a Regulated Market (PRM), replacing the existing EU-derived UK Prospectus Regulations Rules (PRR) on 19 January. Of most relevance to corporate treasurers are:
1. A change in approach: public offers of all securities are now prohibited, unless an exemption applies. Exemptions include where a security itself is exempt (for example, those issued or guaranteed by a sovereign or regional authority and now including instruments of Islamic Finance) or where offers of securities are made:
- solely to ‘qualified investors’
- to fewer than 150 persons in the UK (other than ‘qualified investors’)
- with denomination sizes of at least £50,000 per unit (or equivalent)
- via listing on a UK regulated market (such as the AQSE or LSE Main Markets), or a primary Multi-lateral trading facility (MTF), such as the LSE’s ISM or AIM markets or AQSE Growth Market), or a public offer platform (POP).
2. Prospectus rules requirements: a prospectus is required if listing on a UK regulated market or on a primary MTF, but not on a POP, with the FCA now granted enhanced rule making powers about when a prospectus is required, the information it should contain and its format (the PRM rules).
3. UK Regulated Market Prospectuses:
- once approved by the FCA, the prospectus must be made available before the end of the offer period, even where final terms are not available, and in advance of the admission to trading
- there is now a single disclosure standard for all denominations based on the UK Prospectus Regulation regime’s wholesale standard
- an overriding “necessary information” test still applies, but is not linked to denomination size
- for low denomination securities, prospectuses will no longer be required to include items such as quarterly or half yearly financial information, or a description of offering and underwriting arrangements
- the use of prescribed accounting standards is now exempted and forward incorporation by reference of historical financial information in a base prospectus is now permitted without triggering the need for the preparation of a supplement – subject to the impact on existing information (an important clarification from the consultation)
- to encourage issuers to disclose more detailed forward-looking information in prospectuses, the new rules establish a different liability threshold (based on fraud or recklessness) for certain categories of such statements (“Protected Forward- Looking Statements” or “PFLS”), with the FCA responsible for specifying what qualifies as PFLS and the labelling and other requirements that should apply to them
- the use of supplementary prospectuses has been made more flexible (allowing for the introduction of new features to the T&Cs) and the requirement for summaries in non-equity prospectuses has been scrapped (a significant change from the consultation)
- if an issuer makes sustainability related disclosures, there are specific minimum disclosure expectations, especially if these are material to its prospects.
4. Further issuances of non-equity securities and prospectuses:
- where a non-equity instrument (for example, a bond) is already admitted to trading, a new prospectus is not required when “tapping” that bond, as long as the number of new securities created do not exceed 75% of those already admitted to trading.
5. “Plain vanilla” listed bond: originally referred to as a “non-complex listed corporate bond” in the early consultation, this is a new concept for the FCA glossary and defined as a debt security that:
- is admitted to the FCA’s “official list”
- is guaranteed by the issuer’s parent undertaking, which should be an Equity Shares (Commercial Companies) (ESCC) issuer, where the issuer is an ESCC subsidiary
- bears a fixed coupon rate (including zero and stepped coupons) or a floating coupon rate, as long as it is referenced to: the BoE official bank rate or an equivalent central bank rate; a benchmark or index that tracks UK inflation; SONIA or other equivalent risk-free rate in any currency; or EURIBOR (and not subject to a modification such as a cap or floor, unless a zero floor)
- is unsubordinated, unsecured and not subject to bail-in
- is not a convertible or asset-backed security or one that gives rise to a payment or delivery obligation linked to an underlying asset or index (other than those shown above).
6. Amendment of Product Governance Sourcebook (PROD), Disclosure Guidance and Transparency Rules (DTR) and the Conduct of Business Sourcebook (COBS): As well as aligning prospectus requirements for lower and higher denomination bonds to remove disincentives to issue bonds in low denominations, the FCA had identified that there were other parts of the FCA Handbook that deter corporate issuers (and their wider stakeholders/advisers) from issuing in low denominations.
Thus, through the use of the “plain vanilla listed bond” concept and after consultation, the following amendments/new rules have been introduced:
- PROD 3 (from MIFID II) is amended to include guidance on its application to “plain vanilla listed bonds” issued by an ESCC or an ESCC subsidiary, to say that: 1) they are an example of the type of financial instruments that would ordinarily be regarded as ‘simple’ and which are therefore “likely to be compatible with the needs and characteristics of customers in the mass retail market and appropriate for distribution by way of a wide range of channel”, with manufacturers therefore not expected to undertake a detailed target market assessment, but to use a simplified process; and 2) they are exempted from the rules requiring ongoing review of financial instruments by manufacturers
- COBS is updated with a new rule, clarifying that where a “plain vanilla listed bond” issued by an ESCC issuer or ESCC subsidiary includes a make-whole call option, this does not make them complex instruments (this follows on from guidance provided in CP25/2 that Consumer Duty rules do not apply to issuers and that a carve out would apply to certain activities, including underwriting activities, involving qualifying “plain vanilla listed bonds” seeking admission to trading on a regulated market)
- The Disclosure Guidance and Transparency Rules (DTR) are amended so the existing exemption from the annual and half-yearly financial reporting requirements available for issuers of wholesale debt securities are extended to ESCC or ESCC subsidiary issuers of “plain vanilla listed bonds”
- while not a rule change, Policy Statement PS25/9 also states that other types of non-equity securities issued by ESCC issuers or ESCC subsidiaries – or “plain vanilla listed bonds” issued by other types of issuer – are only one example of a simple financial instrument for the purposes of product governance rules and suitable for the mass retail market.
6. Primary MTF Prospectuses (“MTF admission prospectus”):
- the FCA set the rules, but primary MTF operators set their own content requirements and approve
- once approved, it is assumed the prospectus must be made available as per UK regulated market prospectuses (see above), but the new rules are not clear
- primary market MTF rules are set out in a new chapter in the FCA Market Conduct Sourcebook, but the rules covering protected forward-looking statements are as for UK Regulated Markets
- given that primary MTF securities do not appear on the FCA Official List, even if a bond offering looks to be “plain vanilla”, alleviations are unlikely to apply, making the use of low denominations and retail inclusion also unlikely.
With the new rules now published and implementation due on 19 January 2026, treasurers have time to get ahead of the curve and consider how they can capitalise. Assuming the new UK Consumer Composite Investment (CCI) rules, set to be published later this year, replacing the UK PRIIPs framework, don’t throw up any unexpected surprises, these reforms look to be an encouraging start to a vibrant new era for the UK capital markets.
As Michael Smith, head of debt capital markets at Winterflood Securities, says: “These reforms open the door to a larger, more diversified investor base. Retail demand is there if issuers want it.”
