Regulation of Public Offers
All references to statute on this page are to the Financial Services and Markets Act 2000 unless otherwise stated.
The FSA is the designated UK Listing Authority and sets rules relating to the listing of new shares. Companies must ensure that their shares comply with the Listing Rules set out in the Purple Book and they have been admitted to Offers to be listed on the main market of the Stock Exchange are regulated by Part VI of the Financial Services and Markets Act 2000.the Official List maintained by the FSA as UK Listing Authority.
The Financial Services and Markets Act 2000 imposes a duty of disclosure on companies to reveal "all such information as investors and their professional advisors would reasonably require and expect to find there for the purpose of making an informed assessment" of the financial position of the company issuing the shares and the rights attached to them.
Companies issuing shares must publish a prospectus approved by the FSA as UK Listing Authority as well as applications to apply for shares (Section 80) and by Section 85(1), the offer cannot be made to the public until the prospectus has been issued. The prospectus must contain:
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The Company details such as its name, registered office, directors, advisers, incorporation details and directors' functions
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The Company capital structure, both as it is before and as it will be after the issue of shares, rights attaching to the shares and details of recent issues, and details of any substantial or controlling shareholders
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Information about the activities of the company
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Company financial information and accounts
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Information on the future prospects of the business
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Details of management - including directors' pay and their terms of engagement
There is an exemption from the requirement to provide listing particulars where they have already been published in the previous twelve months, the shares are already listed in another EU member state and have been for at least three years, or they are allotted to employees of the company.
Where the shares are to be admitted to the main market, there will be an exemption from the need to produce a prospectus where the shares are to be offered to fewer than fifty people, they are to be offered to people whose business involves buying, selling and managing shares, they are to be offered to a restricted circle of people all of whom have the knowledge to appreciate the risks involved in the offer, and the issue is intended to raise less than 40,000 euros in total (Schedule 11).
Shares issued other than to the main market
Shares to be listed on other markets including AIM, OFEX or through OTC, are governed by the Public Offer of Securities Regulations 1995 (POSR1995).
Listing particulars are not required for the issue of such shares but a prospectus is still required, which gives certain information to the public and must be filed with the Registrar of Companies. Again there is a general duty to disclose "all such information as investors and their professional advisors would reasonably require and expect to find there for the purpose of making an informed assessment" (POSR Regulation 9(1)) and the liability to pay compensation will lie with the person responsible for the prospectus.
By Regulation 7 POSR1995, there are exemptions from the need to produce a prospectus, and these are the same as those set out in Schedule 11 of the Financial Services and Markets Act 2000 in relation to shareas listed on the main market.
Note that there are regulations relating to the advertisement of investments (See Section 21 and Section 98 Financial Services and Markets Act 2000).
There may be liability for misleading information in the prospectus or listing particulars. Any person responsible for listing particulars is liable to pay compensation to a person who has: (1) acquired securities to which the particulars apply; and (2) suffered loss in respect of them as a result of any untrue or misleading statement in the particulars or as a result of the omission from the particulars of any matter required to be included (Financial Services and Markets Act 2000 s 90(1)). If listing particulars are required to include information about the absence of a particular matter, the omission from the particulars of that information is to be treated as a statement in the listing particulars that there is no such matter (Financial Services and Markets Act 2000 s 90(3)). A person will not, however, be subject to civil liability solely on the basis of a summary in a prospectus unless the summary is misleading, inaccurate or inconsistent when read with the rest of the prospectus: Financial Services and Markets Act 2000 Act s 90(11).
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