PRM 9.1 Scrutiny of a prospectus

This chapter applies to: 

(1) an applicant who submits either of the following for approval by the FCA:

     (a) a prospectus; or

     (b) a supplementary prospectus; or

(2) a person who files a universal registration document or final terms.

If the prospectus is not a single document but comprises separate documents:

(1) an application for approval may relate to one or more of those separate documents; and

(2) a reference in this section to a prospectus is, unless the context otherwise requires, to be taken to be a reference to the document or documents to which the application relates.

Reference in this section to a prospectus is, unless the context otherwise requires, to be taken as including a reference to a supplementary prospectus.  

The purpose of this chapter is to:

(1) explain the process and procedure that the FCA will adopt in order to review and scrutinise a prospectus or amendments to a prospectus:

     (a) submitted for approval; or

     (b) filed; and

(2) provide the rules that an applicant submitting a prospectus for approval or filing without prior approval must follow.

For the purposes of scrutinising the completeness of the information in a draft prospectus, the FCA may consider all of the following:

(1) whether any draft prospectus is drawn up in accordance with the rules in PRM, according to the type of issuer, the type of issuance, the type of transferable security and the type of admission to trading; and

(2)  whether the issuer has a complex financial history or has made a significant financial commitment, as referred to in in PRM 4.4.1R.

Where the FCA review carried out in accordance with PRM 9.1.5G determines any shortcomings in the draft prospectus, the FCA may require the issuer to include, modify or remove information from a draft prospectus, taking into account the following:

(1) the type of transferable securities;

(2) the information already included in the prospectus and the existence and content of information already included in a prospectus of an entity other than the issuer, as well as the applicable accounting and auditing principles;

(3) the economic nature of the transactions by which the issuer has acquired, or disposed of, its undertaking or any part of it, and the specific nature of that undertaking; and

(4) whether the issuer can obtain with reasonable effort information about the entity other than the issuer.

For the purposes of scrutinising the comprehensibility of the information in a draft prospectus, the FCA may consider whether the draft prospectus:

(1) has a clear and detailed table of contents;

(2) is free from unnecessary reiterations;

(3) groups related information together;

(4) uses an easily readable font size;

(5) has a structure that enables investors to understand its contents;

(6) defines the components of mathematical formulas and, where applicable, clearly describes the product structure;

(7) is written in plain language;

(8) clearly describes the nature of the issuer's operations and its principal activities; and

(9) explains trade or industry-specific terminology.

For the purposes of scrutinising the consistency of the information in a draft prospectus, the FCA may consider all of the following:

(1) whether the draft prospectus is free of material discrepancies between the different pieces of information contained in it, including any information incorporated by reference in accordance with PRM 5 (Incorporation by reference and use of hyperlinks);

(2) whether any material and specific risks disclosed elsewhere in the draft prospectus are included in the risk factors section;

(3) whether the information in the summary is in line with information elsewhere in the draft prospectus;

(4) whether any figures on the use of proceeds correspond to the amount of proceeds being raised and whether the disclosed use of proceeds is in line with the disclosed strategy of the issuer;

(5) whether the description of the issuer in the operating and financial review, the historical financial information, the description of the issuer's activity and the description of the risk factors are consistent; and

(6) whether the working capital statement is in line with the risk factors, the auditor’s report, the use of proceeds and the disclosed strategy of the issuer and how that strategy will be funded.

The FCA may require additional information to be included in the prospectus based on the activities of the specialist issuers falling under one of the following categories:

(1) property companies; 

(2) mineral companies;

(3) investment companies; 

(4) scientific research-based companies; 

(5) start-up companies; and 

(6) shipping companies.

Where necessary for investor protection, the FCA may apply criteria in addition to those laid down in PRM 9.1.5G to PRM 9.1.8G for the purposes of scrutinising the completeness, comprehensibility and consistency of the information in the draft prospectus.