Primary Market Bulletin 40

Newsletters Published: 27/05/2022 Last updated: 30/05/2022

Newsletter for primary market participants 

May 2022 / No. 40

About this edition

Welcome to the 40th edition of the Primary Market Bulletin (PMB).

In this edition we provide feedback on our consultation in PMB 34 and highlight changes to the Knowledge Base on the prospectus regime as a result of the consultation.

Changes to the Knowledge Base:

  • update to one existing procedural note
  • update to 10 existing technical notes
  • four new technical notes

Consultation feedback and changes to the Knowledge Base

This PMB 40 explains the changes we are making to the Knowledge Base on the prospectus regime following our consultation in PMB 34.

In PMB 34 we consulted on changes to 1 procedural note, 10 technical notes and on creating 4 new technical notes. In particular, PMB 34 set out our proposals to:

  • Create a new technical note, Primary Market/TN/619.1 to adapt, as FCA Guidance, the European Securities and Markets Authority’s (ESMA) Guidelines on disclosure requirements under the Prospectus Regulation. We would also augment it with the measures on specialist issuers in the ESMA update of the CESR recommendations, the consistent implementation of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive, 30 March 2013 (CESR Recommendations) previously available on the Level 3 Materials section of our Handbook site
  • Incorporate certain explanations in the ESMA Question and Answers, Prospectuses, 30th update version – April 2019 (PD Q&As) previously available on the Level 3 Materials section of our Handbook site, into technical notes.

As a result of the feedback we received we are making further changes to the procedural note and to four technical notes.

For ease of reference, the following table explains which of the notes we consulted on in PMB 34 are entirely new notes for our Knowledge base and which notes we are amending based on feedback to our consultation.

No. Title                                                                                                                                  New notes Amended following consultation?
TN/320.2 Working capital statement - basis of preparation    
TN/321.2 Working capital statements and risk factors    
TN/340.3 Profit forecasts and estimates   Yes
TN/601.3 Public offers    
TN/602.4 Exemptions from the requirement to produce a prospectus   Yes
TN/604.2 Prospectus Regulation advertisement regime   Yes
TN/605.4 Supplementary prospectuses    
TN/607.1 Global Depositary Receipts (GDRs) New  
TN/619.1 Guidelines on disclosure requirements under the Prospectus Regulation and Guidance on specialist issuers (the Guidelines) New Yes
TN/623.2 Documents available for inspection    
TN/627.2 Prospectus content - Financial information    
TN/633.2 Pro forma financial information    
TN/636.1  Order of information in the prospectus New  
TN/637.1 Level of disclosure for securities subject to conversion or write-down powers New  
PN/904.4 Public offer prospectus - Drafting and approval   Yes

We received feedback from eight respondents, four accounting firms, one law firm and three industry bodies. Most of the feedback addressed accounting issues in the FCA Guidelines, but we also received comments on the procedural note and some of the other technical notes that we consulted on and comments from a debt securities perspective.

We set out our summary and response to key points in the feedback below. 

Some of the feedback suggested additional changes to the Guidelines or the other technical notes, regardless of the relevant guidance being the same or substantively the same as the CESR Recommendations or the PD Q&A they replaced. We have considered this feedback but are not generally persuaded to make any changes in response to it. As stated in PMB 34, our consultation focused on where we diverged from the Guidelines and on consolidating the PD Q&As into the existing, and new, procedural and technical notes. We also note there is an ongoing review of the prospectus regime arising from the recommendations made in Lord Hill’s UK Listing Review report of 3 March 2021. So we will consider these proposals, if relevant, in due course as part of our work under the UK Prospectus Regime Review. A review of existing materials, such as in the CESR Recommendations, would not be an efficient use of our resource ahead of the UK Prospectus Regime Review work.

Other feedback suggested smaller drafting changes to the Guidelines. We did not make these changes where we considered that the Guideline’s current wording is sufficiently clear or adequately illustrates their intent.

Some respondents asked that we should align our guidance on certain guidelines with that of industry bodies in the UK. The Guidelines do not seek to replicate industry specific guidance, but to provide guidance from the FCA on how firms should interpret the disclosure requirements of the annexes in the PR Regulation. We would also note that the issuer community includes non-UK issuers where different standards and guidance may apply. So we have not adopted guidance from other industry bodies as part of this technical note, though we are sympathetic to the principle that industry guidance should be consistent.

Respondents also pointed out some duplication in guidance between the existing technical notes and the FCA Guidelines. Some suggested removing this duplication and proposed, for example, that all guidance on a specific topic be contained in one place. We are aware of these duplications. However, removing them would require a more wholesale review of the content of the existing technical notes and comparison with the new technical note on the FCA Guidelines. Other comments suggested there could be better integration with the Primary Markets Effectiveness Review and the UK Prospectus Regime review. We note these points, as well as the suggestion encouraging us to consider publishing guidance quickly when evolving issues arise. We will take this feedback into account as we plan future updates. In view of the ongoing review of the prospectus regime, we will not be conducting such a review at this time.

Respondents supported a number of our changes, including: 

  • welcoming TN/619 and the related new and amended technical notes 
  • our approach to incorporating relevant CESR Recommendations and ESMA guidance into the Knowledge Base 
  • our approach to the inclusion and exclusion of PD Q&As into the Knowledge Base 
  • maintaining the approach set out in PD Q&A 52 towards proforma financial information 
  • consequential changes to TN/320, TN/321, TN/340 and TN/633; the approach to working capital on a minimum net proceeds’ basis in certain circumstances 
  • stating that the PR Q&As remain relevant to the UK prospectus regime and in particular Q&As 4.1 and 4.2 on share option schemes and free offers, and 
  • the usefulness of carrying forward PD Q&A 40 into TN/602

On 1 March 2022 the Treasury published UK Prospectus Regime Review; Review Outcome explaining that the government will delegate a greater degree of responsibility to the FCA to set out the detail of the new prospectus regime for admission to UK Regulated Markets. This PMB does not undertake that work, rather it adapts the ESMA Guidelines arising from the Prospectus Regulation (PR) repealing and replacing the Prospectus Directive (PD) and other changes.

Primary Market/TN/619. 1 – FCA Guidelines on prospectus disclosure

We explained in PMB 34 our proposals:

  • to adapt the Guidelines as FCA guidance because the Guidelines are essentially an updating of the CESR Recommendations, and we participated in drawing up the Guidelines
  • for 2 minor modification to the Guidelines, to:
    • working capital – closed ended investment funds
    •  pro forma financial information
  • to move the specialist issuers measures in the CESR Recommendations to form part of our new technical note on the Guidelines.

Below, we address feedback on these issues and other matters raised in the consultation responses.

Working Capital

Minimum net proceeds

We received six responses on our proposal to introduce a new paragraph 151A that would allow closed-ended investment funds to rely on minimum net proceeds when calculating their working capital in certain circumstances. 

While respondents were supportive overall of this addition to the Guidelines, some proposed that the measure should also be extended to commercial companies that are new applicants, for example mineral companies. One respondent noted additional costs if bank facilities have to be entered into in order to provide a clean working capital statement instead of being able to rely on the minimum net proceeds.

We note that the use of the minimum net proceeds approach by commercial companies is fairly rare. As we explained in PMB 34, we would not generally expect commercial companies to use this approach, given their more complex working capital requirements. Further, we have not received sufficiently compelling new reasons as to why this approach should apply to new applicants that are commercial companies generally.

One respondent noted that the new paragraph 151A does not refer to the possibility for an issuer to publish a supplementary prospectus with a new working capital statement if they do not raise the minimum net proceeds. We would generally expect that an issuer would choose a level of minimum net proceeds below which they would not proceed with the offer. However, we clarify that the obligation to publish a supplementary prospectus under Article 23 of the PR, on supplements to the prospectus, is not hindered by the guidance in the FCA Guidelines. Nor does it prevent an issuer from including disclosure about the application of Article 23 to certain circumstances in a prospectus. For example, to make clear that where an issuer decides to proceed notwithstanding that the minimum net proceeds are not raised, it would publish a supplementary prospectus.

Four respondents also asked why the minimum net proceeds approach is not applied to issuers that are publishing a price range prospectus, given that the final price will not be available at the time of publication of the document. Additionally, as one respondent noted, the underwriting agreement may contain a conditionality involving agreement on price, which may not fulfil the ‘firm commitment’ basis of underwriting set out in Guideline 33.

We do not consider the content of Guideline 33, other than the narrower application of the minimum net proceeds approach in paragraph 151A, to represent a change from our approach to working capital under the CESR Recommendations. This also applies to our approach to working capital and underwriting in the case of a price range prospectus. We highlight that it is not our intention to change our current approach and practice in this area. Where the issuer is relying on the proceeds of the IPO fundraising for a clean working capital statement, we typically see issuers calculating proceeds using the low end of the price range, or the lowest amount of proceeds that can be obtained within the price range and the range of the number of shares to be offered. Should the agreed price fall outside of the range, issuers will need to consider their obligations on withdrawal rights, whether a supplementary prospectus needs to be published, and whether there is any impact on the working capital statement. Alternatively, if a price cannot be agreed we would expect the transaction to fall away. In that case, the Guidelines further set out the expectation that corresponding disclosure would be included in the prospectus (Guideline 33, paragraph 148).

Having considered the various responses received we are not making any changes to Guideline 33, in line with our responses above.

Compatibility of new drafting with the Technical Supplement – working capital statements in prospectuses and circulars during the coronavirus epidemic

Paragraph 132 in Guideline 29 carries over from the CESR Recommendations the principle that assumptions and caveats should not be included in a working capital statement. Three respondents noted that the wording that such references are not ‘normally’ acceptable has been removed. They questioned whether this should be kept, in light of our reference to this term in diverging from the CESR Recommendations in our Technical Supplement – working capital statements in prospectuses and circulars during the coronavirus epidemic (published on 8 April 2020). One respondent thought that the Technical Supplement should be referenced in the Guidelines, so as not to be superseded by them.

As the FCA Guidelines have the status of guidance, rather than rules, our view is that the omission of the term ‘normally’ does not prevent us from diverging from the guidance and taking similar measures to those described in our April 2020 coronavirus epidemic Technical Supplement should exceptional circumstances arise in future. Further, the adoption of the Guidelines does not supersede the Technical Supplement. As the latter is a separate temporary measure, we do not believe it is appropriate to refer to it in the FCA Guidelines. Additionally, PMB 39 published on 23 March 2022, addresses the removal of those temporary measures which had been put in place due to the pandemic.

In light of the above, we have decided to not re-introduce the term ‘normally’ in paragraph 132.

Going concern

Guideline 29, paragraph 131 states that ‘Where the auditor’s report contains a statement relating to ’going concern’, and the working capital statement is clean, the persons responsible for the prospectus should provide explanation for this in the prospectus’. Several respondents (3) pointed out that audit reports in the UK, including SIR 2000 reports, require a statement on going concern in all cases. They asked whether the intention was that an explanation should be provided in all cases, or only if there was a modification to this statement. 

We can confirm that it was not our intention, or our interpretation of the guideline, that an explanation has to be provided in all cases where an audit report addresses going concern. Instead, we would expect an explanation to be provided where the audit report draws particular attention to going concern issues, such as a modification or key disclosure on material uncertainty in relation to going concern. We have clarified the drafting to state that:

Where the auditor’s report contains a statement relating to “going concern” is modified, contains an emphasis of matter, or other disclosure on a material uncertainty in relation to going concern, and the working capital statement is clean, the persons responsible for the prospectus should provide an explanation for this in the prospectus.


Several respondents noted that paragraph 133 in Guideline 29 states that an issuer should disclose whether the proceeds of the offer have been included in the calculation of its working capital. Three respondents said their preference was to revert to the current practice of voluntarily including this information in the working capital statement on the same basis as, for example, bank facilities. One respondent asked whether paragraph 133 should be updated to also include bank facilities, as currently referred to in TN/320.2 (Working capital statement – basis of preparation).

We believe that consistent explanation in cases where the net proceeds are being taken into account for the calculation of working capital is useful information for investors in the context of a prospectus which describes the relevant offer that gives rise to the proceeds. This can be distinguished from bank facilities, which are not the subject of a prospectus. Further, the drafting does not prevent an issuer from excluding the net proceeds where they are not being relied on for a clean working capital statement. The emphasis in the Guidelines is on the treatment of net proceeds, rather than a more general discussion of statements that are basis of preparation information, as opposed to those setting out assumptions. We have therefore not made any changes to paragraph 133. 

Insurance and re-insurance undertakings

We received one response to Guideline 37 on working capital and insurance and reinsurance undertakings. The respondent noted that there may not be a requirement for companies to formally agree their liquidity metrics with the relevant regulator, but that they may agree their solvency position. The respondent said this should be reflected in the drafting of the Guideline. Further, the respondent felt that issuers should have regard to any expected changes in the applicable prudential requirements during the forecast period when assessing their working capital position, as well as to the current applicable requirements.

On the first point, we note that paragraph 163 states that ’…insurance or reinsurance undertakings should use the metrics which they have adopted and submitted to the supervisory authority…’, which we believe puts the use of ‘agreed’ in paragraph 162 into context. However, to avoid confusion, and recognising the international nature of the markets, we have made a slight change to the drafting to state:

When determining its working capital, an issuer which is an insurance or reinsurance undertaking should take the liquidity metrics which were agreed with the supervisory authority (if applicable, those which were agreed with the supervisory authority) and regulatory capital requirements as the starting point. 

On the second point, we agree that any expected changes in applicable prudential requirements during the relevant forecast period should be taken into account when calculating working capital. This has been our expectation in practice to date. Moreover, the principle applies to credit institutions in the same way. Both Guidelines 36 and 37 refer to the guidance set out in Guidelines 29-35, which include the guidance on calculating present requirements. While the latter contain a forward looking element which all issuers should also take into account when considering their working capital position, our view is that a clarification in Guidelines 36 and 37 is appropriate and so we have added the following wording to paragraphs 160 and 164:

The issuer should also take into account the effect of any expected change to the applicable liquidity metrics and prudential requirements during the period covered by the working capital statement. 

Robust procedures

Guideline 30 states that the issuer should prepare its working capital statement based on robust procedures so that there is very little risk that the statement is challenged. Two respondents noted that the drafting had changed from the CESR Recommendations which referred to ensuring that there is very little risk that the basis of such statement is subsequently challenged. We don’t consider that the omission of the word ’basis’ constitutes a fundamental change to the meaning and intent of the Guideline. Our view is that any challenge of the statement would have to include a consideration of the basis on which the statement was made. We have therefore not made any changes to the drafting of the Guideline.

Profit forecasts

‘Valid and correct’

For registration documents and universal registration documents (URD) with profit forecasts or estimates and used in constituent parts of a prospectus, paragraph 49 in Guideline 10 states that persons responsible for the prospectus should assess whether the profit forecasts or estimates are still ‘valid and correct’. Guideline 13 includes similar guidance for profit forecasts or estimates made by an acquisition target. A number of respondents (5) expressed their discomfort over the use of the term ‘correct’ about a profit forecast or estimate. Specifically, respondents felt that, given the nature of a profit forecast as being a forecast, it cannot be deemed to be ‘correct’. Two respondents also noted that the annex requirement (for example in Annex 1 item 11.1) only refers to the validity of the forecast or estimate. Two respondents suggested it may be more appropriate to replace ‘correct’ with ‘not misleading’, another suggested we should delete the reference to ‘correct’. 

We note that the CESR Recommendations include references to forecasts being correct in paragraphs 42 and 45, but also that the PD annexes (e.g. Annex I, item 13.4) used the term ‘correct’. As some respondents noted, the PR Regulation annex requirement now only refers to ‘valid’. Based on feedback, we have reconsidered the terminology in Guideline 10, paragraph 49 and Guideline 13. We agree that using the term ‘correct’ for a forecast or estimate is a potentially difficult concept. On the drafting of the annex requirement itself, we do not believe that the additional reference to ‘correct’ is necessary to understand the requirements of the annex item. So we have deleted the references to ‘correct’ in paragraphs 49 and 61.

Amendments and supplementary circulars

Guideline 10 also addresses the procedure that should be followed for profit forecasts or estimates included in a registration document or URD. Paragraph 49 clarifies that, where these documents are used as constituent parts of a prospectus, the persons responsible for the prospectus should assess whether the profit forecast or estimate is still valid and correct. If they are not, then an amendment should be made by filing a supplement or amendment. A number of respondents (three) asked why the guidance in this paragraph does not include the option of stating that the profit forecast or estimate is no longer valid.

The emphasis here was on ensuring that any update made to a forecast or estimate, whether by stating invalidity or giving a new forecast or estimate, was published via a supplementary prospectus or amendment, rather than to change the meaning and provisions of the annex text. To clarify this point, we have further amended the text of paragraph 49 so that it reads:

If they are no longer valid and correct, the persons responsible for the prospectus should amend follow Annex 1 item 11.1 (or corresponding items in relevant other annexes) with regard to the profit forecasts or estimates or amend such profit forecast or estimate, as of the date of approval of the prospectus, by filing a supplement or amendment.


We received a number of comments (seven) on the requirement for profit forecasts and estimates to be comparable, and the further guidance on comparability set out in Guideline 11.

These centred on the concept of a profit forecast or estimate based on pro forma financial information (paragraph 54), comparability in the context of a change in accounting policy (paragraph 56), and the guidance to specify whether the profit forecast or estimate has been audited or subject to review (paragraph 56).

Pro forma profit forecast

We received three responses on the new drafting in paragraph 54 of Guideline 11, which addresses comparability where a profit forecast or estimate is based on pro-forma or additional financial information.

One respondent thought that paragraph 54 was inconsistent with other content of the Guideline, particularly the principle that a profit forecast should be reliable. A forecast based on pro forma financial information would be based on information that is hypothetical and illustrative, and a forecast based on pro forma information could therefore not be reliable. The respondent also noted that the principles of preparation of a profit forecast are different from those applied to pro forma information.

Another respondent noted that Annex 20, item 2.2 only allows for pro forma information for the last completed and/or most recent interim period, so that a pro forma profit forecast for comparison with an actual profit forecast could not be constructed. This respondent also asked how pro forma financial information, which is used to illustrate a particular effect, could be used to form the basis for a comparison. Another respondent also pointed out that Annex 20 does not allow for pro forma information to be produced for the current period. They felt that a profit forecast or estimate could not ever be based on pro forma financial information. An issuer may prepare a profit forecast for a period in which an acquisition is assumed to complete by a specific date and may then state what the forecasted results would have been if the acquisition had happened at the beginning of the forecast period. The respondent believed the first to constitute a profit forecast, but the second to constitute pro forma information. They asked whether, if the guidance remains as is, a pro forma profit forecast would be subject to the requirements of Annex 20, including preparation and the need for an accountant’s/auditor’s report.

The purpose of paragraph 54 is to illustrate how the comparability principle would be applied where an issuer has made a significant financial commitment or has a complex financial history and includes a profit forecast which assumes that the transaction(s) in question has/have completed. The paragraph is not intended to suggest that the issuer produces a pro forma over the profit forecast. In practice, it is very rare for such forecasts to be made, and the key point here is that the comparability principle, as set out in the other paragraphs of Guideline 11 should also be considered when producing such forecasts and estimates. Having reconsidered the drafting and intent of this paragraph given these comments, we have removed it to avoid unnecessary confusion. Instead, we have added new drafting to remind the persons responsible for the prospectus to have regard to comparability when producing profit forecasts and estimates in the context of a significant financial commitment or complex financial history. We have therefore made the following amendment:

Guideline 11, paragraph 54: If a profit forecast or estimate is based on pro-forma or additional financial information, it should be made clear that this is the case. If so, the profit forecast or estimate should be compared with the pro-forma or additional financial information. In such a situation the pro forma profit forecast or estimate should be prepared in a similar manner to the pro forma or additional information, i.e. the same principles should be used when preparing the pro forma profit forecast or estimate as when preparing the pro forma information. Where the persons responsible for the prospectus include a profit forecast in the prospectus in the context of a significant gross change or a complex financial history, the principles in relation to comparability set out in this Guideline also apply.

Changes in accounting policy

One respondent thought, by definition, it was not possible to compare a profit forecast or estimate with both the historical financial information and financial information to be published following the current accounting period. Two respondents recommended the ICAEW Guidance in the Technical Release 04/20CFF as a better approach to follow and align the text with. One respondent said it was unclear how the principles of IAS 8 referred to in paragraph 56 would apply and another asked for clarification on whether comparability with historical financial information or financial information for the current accounting period was more important.

Paragraph 56 states that, where there has been a change in accounting policy and a profit forecast or estimate is prepared, the persons responsible for the prospectus should apply the principles of IAS 8 or any other transitional disclosure principles under IFRS or a similar requirement of the applicable accounting framework. It is our understanding that in applying the principles of IAS 8, an issuer would prepare the profit forecast or estimate according to the new accounting policies to be adopted. They would include additional explanatory information about the differences between the forecasted metric on the basis of the new accounting policies and the metric as applied for the historical financial information. We believe this to be in line with respondents’ suggestions and so have decided not to change the drafting of the Guidelines.


Paragraph 56 of Guideline 11 states that persons responsible for the prospectus should also specify whether the profit forecast or estimate has been audited or subject to review. We received five responses to this part of the guidance. Four of these explained that profit forecasts and estimates are not audited or reviewed and two further noted that an assurance standard applied in the UK instead (SIR 3000). Two respondents also pointed out that the PR Regulation no longer requires an accountant’s/auditor’s opinion on a profit forecast or estimate. Three respondents thought the sentence should be deleted.

Having considered the feedback received, particularly the fact that the PR Regulation no longer mandates an auditor’s/accountant’s report where a profit forecast or estimate has been included in a prospectus, we have removed this sentence from the Guidelines for profit forecasts and estimates.

Material undertaking

Guideline 13 (paragraphs 61 & 62), addresses the treatment of profit forecasts or estimates for a material undertaking that an issuer has acquired. The Guideline is in substance unchanged from the CESR Recommendations. However, it includes further guidance on cases where the accounting policies applied by the material undertaking are different from those applied by the issuer. We received few comments on this Guideline overall, but one respondent asked what the consequences were if the accounting policies were different. The respondent also thought the Guideline needs to be considered in the context of our technical note TN/340.2 which sets out when a profit forecast may be considered to be invalid.

On the first point, the Guideline includes a reference to Guideline 11 and the guidance on comparability, which addresses differences in accounting policies.

On the second point, our technical note TN/340.2 points out that while material accounting framework differences may be given as a reason for invalidity of the profit forecast or estimate, there should still be an explanation of the specific impact. So accounting differences in themselves do not automatically mean that we will agree that a profit forecast by a material undertaking is invalid. Where we do not agree that the profit forecast or estimate is invalid, the guidance in Guideline 13 applies.

Pro forma

Accounting periods

Guideline 19 discusses the accounting periods for which pro forma profit and loss statements should be provided where there has been a significant gross change. Paragraph 95 gives an example of an issuer publishing unaudited financial information for the first quarter of the current financial period, as well as audited historical financial information covering the previous three years. In this example, the Guidelines note that pro forma financial information should be provided for the last audited full annual financial period, and point out that there may be a situation where it is necessary under Article 6 that pro forma financial information for both the interim and the latest full year period is required.

One respondent sought clarity on whether pro forma financial information could be provided solely for an interim period, as paragraph 95 seemed to suggest that this is not an option, despite the provisions in Annex 20.

Pro forma information can, as stated in Annex 20, be provided for an interim period only. The specific example given in paragraph 95 aims to highlight an example in which interim information only may not be suitable, eg due to the effects of seasonality. The example further highlights that, in some cases, pro forma financial information for both the interim and latest full year period would be appropriate, if it is deemed to be necessary information pursuant to Article 6 of the PR.

Indicators of size

Guideline 18 explains how to assess whether a transaction constitutes a significant gross change within the meaning of Article 1(e) of the PR Regulation or a significant financial commitment within the meaning of Article 18(4) of that Regulation. This should be done using appropriate indicators of size, which the Guideline sets out. A number of respondents (three) have asked whether we could align those indicators of size with the class tests used in the Listing Rules to determine the relative size of a transaction together with the significant transactions regime in Chapter 10 of the Listing Rules. We note that, in practice, class tests are often used in the first instance to calculate the relative size, but may be supplemented by other tests. This is particularly if any of the initial class tests results are considered to be either anomalous or inadequate indicators of relative size in a particular situation. However, the Listing Rules and PR Regulation are different regimes, and we consider any discussion of alignment across these to currently be beyond the scope of the adaptation of the Guidelines.

Significant financial commitment/binding agreement

One respondent asked whether the definition of ’significant financial commitment’ in the Guidelines was as stated in Article 18(4) of the PR Regulation and whether this could be included in the FCA Guidelines. We confirm this is the case, as the Guidelines are issued in respect of the PR and the PR Regulation. However, as the definition is included in the PR Regulation, we do not believe it is necessary to replicate it in the Guidelines. Also, the expression ‘significant financial commitment’ is defined in the Guidelines in terms of Article 18(4) of the PR Regulation.

Another respondent suggested that the explanation in respect of ’binding agreement’ which used to be contained in Article 4a of the Commission Regulation (EC) 809/2004 be included in the Guidelines. As that Article 4a wording was not carried over into the PR or PR Regulation, it cannot be inserted into the Guidelines without further consultation and discussion and so is out of scope of the current project of adapting the Guidelines.

Contingent consideration

Paragraph 115 provides guidance on the inclusion of contingent or deferred considerations in the pro forma financial information. One respondent explained that accounting frameworks have specific requirements to be followed to recognise such contingent or deferred consideration at the point of the transaction. In those cases, the respondent explained, the contingent/deferred consideration should be included in the pro forma financial information to comply with the requirement to present all significant effects directly attributable to the transaction (Annex 20, item 2.3(b)). The respondent felt that the guidance in paragraph 115 was not sufficiently clear about this.

We note that paragraph 115 does explicitly refer to consideration that is recognised as part of the consideration transferred in exchange for the acquiree under the applicable accounting framework, and consider that the drafting is sufficiently clear on this. So our view is that the Guidelines have sufficiently addressed this aspect and we have not made any further changes to the text.

Non-equity prospectuses

We received feedback suggesting that non-equity prospectuses should be exempt from the requirement for an accountant’s/auditor’s opinion on pro forma financial information where this has been included voluntarily, and that this should be reflected in the Guidelines. We do not agree with this view, as we believe that investors in non-equity securities should not receive pro forma information which is less robust than that provided to investors in equity securities.

Historical financial information

Overall, we received limited comments on this section of the Guidelines. One respondent noted that in paragraph 63, which sets out the examples for Guidelines 14 to 16 on historical financial information, the first subparagraph refers to UK GAAP, while the other paragraphs refer to national GAAP. They asked whether there was any particular reason for this. We were not particularly seeking to distinguish between UK GAAP and national GAAPs in this section, and so have changed the reference to national GAAP to ensure consistency.

Audit report over restated historical financial information

We were also asked to clarify the audit report requirements for the bridge approach applied where there has been a change in accounting standards within the period covered by the historical financial information. Paragraph 81 states: ’… In the example provided in Guideline 15, the audit report of the last year (20X3) will cover the restated historical financial information for 20X3 that includes comparative information for 20X2, which will be covered in the same audit report as comparative information.’ One respondent said that in the UK a SIR 2000 report would be produced for the restated periods, and asked whether the comparatives now needed to be covered by a separate audit report, or whether the report on the existing period (in the previous accounting standard) was sufficient.

Annex 1 item 18.1.4 of the PR Regulation mandates that the last audited historical financial information, containing comparative information for the previous year, must be presented and prepared in a form consistent with the accounting standards framework that will be adopted in the issuer’s next published annual financial statements. Further, item 18.3.1. states that the historical annual financial information must be independently audited. In the bridge approach, the last financial year will be presented in the accounting standards framework to be adopted in the next annual accounts. As required by the PR Regulation, it will include the previous year’s (or the middle year where the historical financial information covers three years) restated financial information in the form of comparatives. It will therefore present two years restated financial information. The restatement of the middle year is covered by the comparatives included in the last audited historical financial information. The PR Regulation does not set out a requirement for a separate audit for these comparatives, and this is also reflected in the table in Figure 1 of paragraph 73.

Audit standards

One respondent asked us to clarify the content of paragraph 80 in Guideline 16. They felt that the reference to SI 2016/649 did not give clear information on which auditing standards and forms of opinion are acceptable for use in a prospectus. Further, they noted the references to the Companies Act in the SI may preclude the use of non-UK opinions, and asked whether financial information would have to be restated if the requirements in SI 2016/649 are not met.

Guideline 16 discusses the audit report for restated historical financial information that has been included in the prospectus. The changes made to the Guidelines merely reflect the implementation of the Audit Directive and Audit Regulation into UK law.

Components of the historical financial information

We also received feedback on Guideline 17, paragraph 85. This paragraph provides guidance for circumstances where the applicable accounting framework will not require issuers to prepare all the components of the historical financial information required under the relevant Annexes of the PR Regulation. The respondent asked whether our technical note TN/635.1 was obsolete in light of the guidance in paragraph 85, or whether it would require an amendment.

TN/635.1 addresses a specific circumstance for investment companies applying FRS 102, and we consider the guidance in the technical note to be complementary to the overall principle stated in the Guidelines. As a result, we have not made any changes to the technical note.

Capitalisation and indebtedness

In this section, most responses (four) covered the inclusion of profit and loss in the legal and other reserves line items in the capitalisation statement. However, we also received comments from two respondents querying the scope of the items to be included in the capitalisation statement and, particularly, also the indebtedness statement. Two respondents also commented on the age of the information to be included in the capitalisation statement.

Profit and loss reserve 

For the capitalisation statement, Guideline 38 sets out that the legal reserve(s) and other reserves should not include the profit and loss of the reporting period. Respondents noted that the CESR Recommendations referred to the profit and loss reserve, rather than profit and loss. They also queried the restriction of profit and loss to the reporting period in the Guidelines.

Having considered the feedback and reviewed the drafting around profit and loss in paragraph 169, we agree that the reference to profit and loss here is intended to mean the profit and loss reserve, given its inclusion in the legal reserve(s) and other reserves category. We also note that the approach was intended to be consistent with the approach in the CESR Recommendations. So, for clarity, we have amended the drafting of paragraph 169 to more closely resemble the wording in the CESR Recommendations to state:

Legal reserve(s) and Other reserves should not include the profit and loss of the reporting period reserve. The persons responsible for the prospectus are therefore not expected to calculate the profit and loss of the reporting period account for the purpose of the capitalisation statement.

Two respondents also thought that the exclusion of the profit and loss reserve should not be mandated, as some issuers include it where it is available. The CESR Recommendations stated that Legal Reserve and Other Reserves do not include the profit and loss reserve and so there was no expectation of a profit and loss account to be calculated for the capitalisation statement. This continues to be the case, and as the reserves do not include profit and loss reserve the guidance is not to include these. We do not consider this to be a departure from the CESR Recommendations.

One respondent noted that it has been market practice to also not include other reserves that fluctuate daily as they have to be presented at fair value, and that it would be helpful if their exclusion continued to be allowed.

The CESR Recommendations did not include guidance on the omission of such other reserves, and so we consider that the Guidelines on this point just carry forward the previous guidance.

Age of information in capitalisation statement – 90 days

Two respondents noted that drafting from paragraph 127 of the ESMA Recommendations has not been carried forward into the Guidelines and believed we should reinstate it. The drafting covered the date of the information to be included in the capitalisation statement, which should be derived from the last published financial information of the issuer. It could be older than 90 days if accompanied by a statement on any material changes to the information since that date. Annex 11, item 3.2 requires the statement of capitalisation and indebtedness to be of a date no earlier than 90 days prior to the date of the document, so any guidance stating that the capitalisation statement could be of an earlier date would not be compliant with this requirement. We are therefore not reinstating the drafting of paragraph 127 of the CESR Recommendations.


Two respondents said the Guidelines set out significant additional disclosure requirements when compared to the CESR Recommendations and that this may require additional effort from issuers. One respondent pointed out the difference in drafting between the Guidelines and the CESR Recommendations, with the Guidelines now mandating what was previously advisory. They also felt the requirements go beyond the higher level disclosure requirement in the PR Regulation, which should not be interpreted to mean that issuers should have to prepare what are effectively up to date financial statements within three months of the prospectus date. The respondent also criticised the definitions of capitalisation (including gross debt, as well as shareholder equity), indebtedness (referring to net indebtedness), the inclusion of the liquidity line item and overall advocated a return to the requirements set out in paragraph 127 of the CESR Recommendations. The other respondent found that the current disclosure was well understood in the market and had worked well, and also questioned the usefulness of the extra disclosure. Both respondents were also concerned that the more detailed guidance would lead to inflexibility in accommodating different issuers’ different situations and/or require issuers to create information that is not usually presented in their accounts, as not all of the line items are required to be presented under IFRS.

Some of the line items have been adjusted to include a wider scope than previously. One key change is moving from debt instruments and bond debt to financial debt, which includes some additional items, notably leases and including trade payables.

We recognise that the changes from the CESR Recommendations created by the Guidelines on line items and corresponding descriptions include a wider scope of some of the various forms of indebtedness than was previously the case. This principally involves the change from bank and bond debt to refer to financial debt and the reference to trade payables. Our overall consideration is that the updated guidance does not present a radical departure from the CESR Recommendations and that some of the adjustments arguably better reflect the complexity of financial indebtedness of issuers today. The more detailed line item descriptions should help increased consistency of what is to be considered for disclosure in those line items. On the specific line items mentioned, these do not appear to have changed from the CESR Recommendation, and the last line item in the indebtedness table in the Guidelines now refers to total financial indebtedness.

We note the concerns about inflexibility and the potential need for some issuers to produce information that is not consistent with their annual accounts disclosure. We encourage issuers and their advisors to contact us if they believe that they will face significant difficulties due to the guidance.

Other feedback on the Guidelines

Specialist issuers

Feedback included that Section VI of the draft Guidelines reproduced Annex 29 of the PR Regulation which include at point (c) investment companies, but that there was no further mention of investment companies in the Guidelines.

We added Annex 29 to the draft Guidelines as a convenience for the reader. Noting that it did not form part of the CESR Recommendations, we have removed it.

One respondent also noted that the specialist issuers guidance still included references to ’debt securities with a denomination of less than EUR 50.000’ in the sections on property (paragraph 128 in the specialist issuers section) and shipping companies (paragraph 140). We note that the mineral companies section refers to securities with a denomination of less than EUR 100.000, as it was updated in 2013, and these updates had not been applied to the other sections at the time. We are updating paragraph 128 and 140 to refer to ’debt securities with a denomination of less than EUR 100,000’ to reflect the distinction between debt prospectuses aimed at retail vs wholesale investors.

The Guidelines as guidance

We received feedback that the Guidelines appear to require compliance with its contents, rather than act a guidance, as it uses words such as ‘should’.

We had already included a banner on the front of the Guidelines stating: ‘The information in this note is designed to help issuers and practitioners interpret our Listing Rules, Prospectus Regulation Rules, Disclosure Guidance and Transparency Rules, and related legislation. The guidance notes provide answers to the most common queries we receive and represent FCA guidance as defined in section 139A FSMA’, so clearly marking the status of the Guidelines as FCA guidance. We consider the use of the word ’should’ in the guidelines is consistent with this status.

However, given these comments, we have amended text at paragraphs 11, 12, 219, 1st paragraph of Appendix II and 1st paragraph of Appendix III of the Guidelines to remove some of the language inherited from the ESMA Guidelines that did not reflect the Guidelines’ status as FCA guidance. Also, in paragraphs 103, 158 and 163, and in the headings before Guidelines 33 and 34, we have replaced ‘rules’ with ‘guidance’ to emphasise this point. Similarly, in paragraphs 171and 173 we have deleted the word ‘rules‘.

Consultation duration

Feedback included that PMB 34 had a 6-week consultation period and that a 12-week consultation period had been the standard duration.

Also, after PMB 34’s consultation, we consulted in Chapter 6 of our September 2021 Quarterly Consultation Paper CP21/27 for 5 weeks on minor consequential changes to the Handbook to accommodate the changes we are now making. Handbook Notice 99 explains the changes to the Handbook made following the consultation in Chapter 6 of CP21/27.

We note that our consultation periods have been longer in the past, typically 12 weeks. However, we have had a new approach for the last year and 5-week, 7-week or 9-week consultation periods are now quite standard. This is part of our broader transformation work to improve the way in which we operate. It also brings us into line with those of other public sector organisations.

We note that PMB 34 consulted on a narrow and technical set of changes which would particularly affect market practitioners. The consultation was primarily focused on the changes necessary to move ESMA guidelines, which reflected long-standing CESR recommendations and which generally already reflected our existing practice, into our own Knowledge Base.

We also note the passage of time since PMB 34’s consultation which has been due to our need to prioritise our work and the pandemic.

Other technical notes consulted on in PMB 34

As well as the Guidelines in TN/619.1 we consulted on other new technical notes and amendments to existing procedural and technical notes. Those amendments included consequential changes from adapting the Guidelines, the consolidation of the PD Q&As, changes from the PR which fully applied in the EU, including the UK, from 21 July 2019, when it repealed and replaced the PD, and changes made due to the UK withdrawal from the EU. We also proposed some amendments to the technical notes that reflect current practice and changes to underlying legislation and rules made since the notes were last updated.

We discuss feedback we have received on individual notes below:

Primary Market/TN/340.2 – Profit forecasts and estimates

A number of respondents commented that where a listed company has issued a preliminary announcement of its final results, such preliminary results should not be treated as a profit estimate. As the scope of the consultation in PMB 34 was to incorporate the PD Q&As into FCA guidance, we are proceeding with the proposed guidance, which reflects the current position, so that preliminary results released before the full annual audited financial statements are published constitute a profit estimate. However, we intend to revisit this point in future.

One respondent commented on our proposed amendment to the note which makes clear that a public reference to market expectations may be a profit forecast if the issuer is effectively endorsing the view of analysts. The respondent was concerned that issuers would not be able to fulfil the prospectus disclosure requirements where profit forecasts are made by third parties such as analysts. They felt the result may be that issuers are even less willing than currently to provide any forward guidance to the market. As the proposed guidance reflects our current position, we have retained the new wording with an amendment to make clear that a public reference to market expectations would be a profit forecast only if the issuer is endorsing the view of analysts.

Primary Market/TN/604.2 – Prospectus Regulation Advertisement Regime

Market participants raised concerns that the proposed amendments to UKLA/TN/604.1 made it unclear whether companies are permitted to use pathfinder documents for marketing purposes in UK equity IPOs where securities are to be admitted to a regulated market. So we have amended the proposed wording to reflect more closely the relevant requirements of the rules in COBS 11A on connected research.

Primary Market/TN/602.3 – Exemptions from the requirement to produce a prospectus

One respondent said that in technical note Primary Market/TN/619.1, we had not carried forward paragraphs 173 to 176 of the CESR recommendations. These involve the information to be made available when relying on the exemptions from the requirement for a prospectus in relation to dividends paid in the form of shares, shares issued for free and securities issued to employees. This was an oversight. We have therefore adapted paragraphs 173 to 176 into TN/602.3, Exemptions from the requirement to produce a prospectus, as guidance for the contents of the document required by Articles 1(4)(h) and (i) and 1(5)(g) and (h) of the PR. So we have added the following text adapted from paragraphs 173 to 176 of the CESR to TN 602.3:

Exemptions – dividends paid in the form of shares, shares issued for free and securities issued to employees
The FCA would expect the document referred to in articles 1(4)(h) and (i) and 1(5)(g) and (h) to include:

a) the identification of the issuer and an indication of where additional information on the issuer can be found;

b) an explanation of the reasons of the offer or admission to trading together with an indication of the specific provision of the Prospectus Regulation under which the exemption applies;

c) details of the offer (key terms and conditions of the offer or admission to trading, which is likely to include information on the addressees of the offer, time frame of the offer, minimum and maximum amount of orders, information on where details of the price can be found, if not yet determined), including the nature of the offer (offer to issue or to sell securities), conditions upon which the securities will be issued or admitted to trading, price of the securities, if any.

In relation to the number and nature of the securities involved in the offer or admission to trading, we would expect this to include a summarised description of the rights attaching to the securities.

This document is not a prospectus; therefore information referred to above should be abbreviated and does not need to be approved or filed with the FCA.

We also consider that this document should be made available to its addressees but not necessarily published.

Primary Market/ TN/633.2 – Pro forma financial information

We have received a small number of comments about the amendments to this technical note:


One respondent asked whether synergy benefits can be included as pro forma adjustments. They felt that the proposed amended drafting in Primary Market/TN/633.2 on synergies in pro forma financial information was less clear. They noted that synergies are not objectionable because there is insufficient certainty about the quantum, but because they reflect future actions, as explained in paragraph 115 of the FCA Guidelines. We have reviewed the drafting of the technical note, and find that it merely repeats the guidance in the FCA Guidelines. The Guidelines state that pro forma financial information should generally not include adjustments which depend on action to be taken once the transaction has been completed, even where such actions are central to the issuer’s purpose in entering into the transaction, eg synergies.

P&L illustrative example

One respondent pointed out that the illustrative example for the pro forma P&L also includes information on the balance sheet requirements and that the title should reflect this. This is correct. However, the purpose of the examples is specifically to illustrate the pro forma P&L requirements in such cases, as in our experience issuers find these more difficult to apply. The title and the substance of the examples are unchanged from the current technical note.

So we have left the text of TN/633.2 unchanged from that which we consulted on.

Primary Market/PN/904.3 – Public offer prospectus – drafting and approval

We have made some small changes to this note in response to feedback to reflect all the applicable articles of the PR in the section titled ‘In what format should we produce the Prospectus’. We have done the same to the applicable annexes in the PR Regulation in the section ‘What contents should we include in the Prospectus’. On the latter section, one respondent thought it may be helpful to replace the references to the CESR Recommendations previously included in this section with a reference to the FCA Guidelines on prospectus disclosure. We have included a reference to PRR 1.1.5G which sets out the documents that we consider are relevant to the prospectus regime and have clarified the text on acceptable electronic formats for document submission.

Cost benefit analysis

We did not include a cost benefit analysis for the proposals in PMB 34, noting that ESMA undertook a cost benefit analysis in its consultation on the draft Guidelines. Subsequent responses and the changes since consultation are primarily ones involving clarification and do not add material costs. Meanwhile, the changes have the benefit of ensuring consistent and clear regulatory expectations on prospectus obligations for market participants by placing key EU-derived guidance into FCA technical notes and making small adjustments to better suit UK market practice.

Legislative and Regulatory Reform Act 2006 (LRRA)

We consider that the proposal has regard to the 5 LRRA principles, that regulatory activities should be carried out in a way which is: 

  • transparent 
  • accountable 
  • proportionate 
  • consistent
  • targeted only at cases in which action is needed 

We have had regard to the Regulators’ Code, particularly the requirement for proportionate and targeted regulatory activity. The aim of the amendment to the Knowledge Base in this PMB is to update guidance to issuers and primary market practitioners.

Equality and diversity

We remain confident that our proposal does not give rise to equality and diversity implications.