FCA Policy Statement: New Prospectus Regulation and FCA Handbook changes

The FCA has published Policy Statement 19/12 setting out the near-final rules of the new Prospectus Regulation Rules sourcebook, which will replace the existing Prospectus Rules from 21 July 2019.
On 31 May 2019, the Financial Conduct Authority published Policy Statement 19/12 in which it summarises the feedback received from its consultation on changes to the FCA Handbook to align it with the new Prospectus Regulation (2017/1129). The Policy Statement also contains the near-final rules that will replace the existing Prospectus Rules from 21 July 2019, if as is expected, that is the date on which the Prospectus Regulation becomes directly applicable in the UK.

Background

The Prospectus Regulation came into force on 20 July 2017, though most of its provisions will not be applicable until 21 July 2019. It repeals the Prospectus Directive with effect from that date. Depending on the timing and terms of the UK’s withdrawal from the EU, the Prospectus Regulation will be directly applicable in the UK from 21 July 2019 (see “Brexit” below).

On 28 January 2019, the FCA published a consultation paper (CP19/6) describing the changes proposed to the FCA Handbook to ensure that the Prospectus Rules sourcebook (which forms part of the Handbook) is consistent with the new Prospectus Regulation.

For further information on the FCA’s consultation see “FCA consultation on changes to align the FCA Handbook with the EU Prospectus Regulation and other Prospectus Regulation related developments.”

FCA Policy Statement

As proposed in its consultation, the FCA has confirmed that it will create a new Prospectus Regulation sourcebook to be known as the Prospectus Regulation Rules sourcebook (PRR sourcebook). These new rules will replace the existing Prospectus Rules sourcebook.

The near-final version of the PRR sourcebook is set out in an Appendix to the Policy Statement. The rules will be finalised once changes to referenced text from the Financial Services and Markets Act 2000 and relevant EU legislation have been made.

Most of the rule changes involve removing existing rules that implemented the Prospectus Directive in the UK. The PRR sourcebook also replicates key provisions of the Prospectus Regulation and other relevant EU legislation for reference. This follows the structure of the current Prospectus Rules sourcebook and issuers and their advisers have confirmed that they find it useful to have relevant reference material in a single location.

The Policy Statement also clarifies the following issues that were consulted on and are now included in the near-final rules:

  • Publication of a prospectus: the FCA will send approved prospectuses to the UK National Storage Mechanism (NSM) after 6pm on the working day after it has approved a prospectus (PRR 3.2.6G). This 24-hour delay addresses a concern that if a prospectus could contain inside information, it was important that the FCA did not publish it before the issuer had disclosed that inside information and published the prospectus itself. The delay in the FCA sending a prospectus to the NSM allows the issuer to control the timing of its announcement to the market and the FCA is still meeting its obligation under the Prospectus Regulation to notify ESMA of the approval of the prospectus no later than the end of the first working day after approval.

  • Data submission requirements: the FCA will proceed with the proposed rules which require issuers to provide the FCA with Regulatory Technical Standards (RTS) data (PRR 3.2.7R and 3.2.8R). This will then enable it to forward that data to ESMA in line with the Prospectus Regulation. The FCA intends to enhance its existing Electronic Submission System to allow issuers to submit documents and enter the required RTS data into its existing online system.

Next Steps

The FCA has confirmed that any issuer seeking approval of a draft prospectus on or after 21 July 2019 must do so under the Prospectus Regulation and in accordance with the new PRR sourcebook. Any applications submitted to the FCA on or after 21 July 2019 containing a draft prospectus that conforms to the Prospectus Directive and the Prospectus Rules sourcebook will not be valid and will not be approved.

Where a prospectus has been approved under the Prospectus Directive regime before 21 July 2019, it will be governed by national law under that regime for 12 months after 21 July 2019 or until the end of the prospectus’ validity. For example, if an issuer has a prospectus approved on 20 July 2019, it will be approved under the existing regime and that prospectus will be governed by UK law implementing the Prospectus Directive until the end of its validity, or for up to 12 months from that date, whichever occurs first.

The Prospectus Rules sourcebook as at 20 July 2019 will still be available using the “show timeline” facility in the FCA Handbook to provide legal certainty to issuers regarding prospectuses approved under the Prospectus Directive regime. The FCA’s website also includes sections on submitting a prospectus or circular and forms and checklists, which highlight the different disclosure requirements under the current and future regimes.

Brexit

If as seems likely, the UK has not yet withdrawn from the EU on 21 July 2019, or the UK has left by that date and a withdrawal agreement has been finalised, the Prospectus Regulation will be directly applicable in the UK. The FCA’s new PRR sourcebook would then proceed as set out in the Policy Statement.

If, however, the UK withdraws from the EU without a deal before 21 July 2019, the FCA will not proceed with its proposals for a new PRR sourcebook. The Prospectus Regulation would not be directly applicable in the UK and the Financial Services (Implementation of Legislation) Bill would be the vehicle under which the UK would align itself with the Prospectus Regulation regime. This Bill would be a matter for Parliament and not the FCA.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.