FCA publishes final PISCES rule book
Following shortly after the effective date of the regulations establishing the Private Intermittent Securities and Capital Exchange System Sandbox (see here), the FCA has published its final rules together with feedback from consultation paper 24/29. The rules have been finalised largely as they appeared in the consultation but amendments have been made to reduce the burden on PISCES companies, mostly in relation to disclosure. This is consistent with the FCA’s interim statement published in April (see here).
Core disclosure – reduction in core disclosure requirements and flexibility re additional information
As set out in the draft rules, operators must require participating companies to make “core disclosures" ahead of trading windows. In the final rules the core disclosures have been streamlined and include:
- a business overview;
- a management overview;
- financial statements and related audit report, only where such a report has been produced – this is a relaxation from the proposed rules;
- employee share scheme disclosures – including disclosure of all grants of rights to acquire shares made to the directors, including aggregate number and value. The disclosures will be aggregated to avoid identifying individual directors’ remuneration;
- directors’ trading intentions in a PISCES trading event (which should be correct as at the start of the trading period only);
- an overview of material contracts – this requirement has been relaxed from the requirement to disclose “details” of material contracts in the proposed rules. Contracts “in the ordinary course of business” will not need to be reported on;
- major shareholders – the threshold for identifying major shareholders has been increased from 10% to 25%. PISCES companies will also be permitted to disclose their register of people with significant control in order to satisfy this requirement; and
- key material risk factors specific to the PISCES company.
Disclosures relating to litigation, sustainability and forward looking financial and strategic information have been removed from the core requirements. However, PISCES companies will be free to include more information, if they choose.
Additional disclosure – flexibility for operators
Since the core disclosures may not always provide sufficient information to investors to enable them to trade in the shares of a PISCES company, operators' rules must seek to fill this gap as part of an overarching obligation to ensure that their disclosure rules, taken as a whole, are appropriate for their market.
The FCA has retained flexibility over how operators should achieve this - draft guidance released at the time of consultation put forward both a “sweeper-model" (for example, requiring disclosure of any further information the board of directors of a PISCES company considers relevant) and an “ask-model" (where the operator would design a Q&A function that investors could use to request further information from a PISCES company). In its feedback the FCA has clarified that if an “ask-model” is adopted, the operator rules do not need to require PISCES companies to answer each and every request for further information but operators must explain how their model will work as part of their sandbox application.
Market Supervision – PISCES operators to oversee their markets, MAR will not apply
The FCA states that the primary role of an operator will be to oversee the orderliness of trading taking place during a trading event. However, their obligations around market supervision have a wider reach into misleading company disclosures, manipulative trading strategies and other financial crime, such as conduct prohibited under the criminal market manipulation regime (s.89 and s.90 Financial Service Act 2012).
The rules state that operator’s monitoring arrangements should be proportionate to the size, scale and complexity of the PISCES market, but the FCA does not intend to specify anything more prescriptive to give operators flexibility to establish arrangements that are suitable for their market.
Where an operator finds that its rules have been, or (in some cases) are likely to be, breached it must be able to:
- refuse or cancel admission of a PISCES company's shares;
- postpone or suspend trading;
- terminate a PISCES trading event; and
- make public any decision to postpone, suspend or terminate and notify the FCA accordingly.
The UK Market Abuse Regulation will not apply to PISCES. This means that there will be no obligation to disclose inside information and there will be no civil market abuse regime. The FCA is clear in its feedback that this means that some investors may have more information than others and that must be made clear to investors in a prescribed PISCES Market Risk Warning included as part of any disclosure information disseminated on a PISCES platform.
Trading events – more control for PISCES companies
The FCA recognises that private companies and their investors often want to keep a higher degree of control over the price at which their shares are valued and exchanged. Therefore, as proposed in the draft rules, operator rules must enable PISCES companies to:
- set price parameters (floor or ceiling prices); and
- allow only permissioned trading events (where only certain investors are permitted to participate in trading events). The rules permit only non-discriminatory restrictions that are based on objective criteria, for example if it serves the purpose of promoting or protecting the legitimate commercial interest of the company.
Stamp duty
Separately from the FCA’s rules, the regulations (the Private Intermittent Securities and Capital Exchange System (Exemption from Stamp Duties) Regulations 2025) which exempt transfers of PISCES shares from stamp duty and stamp duty reserve tax have also been made and come into force on 3 July.
Next steps
The PISCES sandbox is now open and prospective operators can start making applications to the FCA. This could enable PISCES share trading later this year.
