CLLS and Law Society publish feedback on PISCES

A Joint Working Party (“JWP”) of the Company Law Committees of the City of London Law Society and the Law Society of England and Wales have been looking at the FCA Consultation Paper 24/29 (“CP”) and published their response dated 17 February 2025 on 25 February 2025.

The JWP confirms it is “broadly in favour” of the suggestions put forward in the CP however they have highlighted some points in the disclosure regime which they feel could be improved.

Soft-form sweeper

The CP sets out a suggested framework for a mandatory disclosure sweeper at paragraph 3.36.

“As well as the core information, the PISCES operator’s rules must require the PISCES company to disclose any other information known to the PISCES company which it considers relevant for PISCES investors in making their decision to trade in admitted PISCES shares.”

The JWP suggest modifying this to a soft-form sweeper which would require directors or senior-managers (or both) of PISCES companies (1) to consider if, in addition to the core information disclosures, there are any matters which they are aware of that would be relevant to an investor’s investment decision and (2) to disclose them. The JWP envisage that the soft-form sweeper wouldn’t require a PISCES company to carry out an additional diligence exercise and that it would be a more effective way to address the balance between (1) the due diligence burden being placed on PISCES companies and (2) the disclosure of necessary, material information to investors to inform their investment decision.

As a related point, the JWP also express their concern with the “ask” disclosure model set out at paragraph 3.25 of the CP (“the provision of information by a PISCES company in response to specific requests by PISCES investors for the purposes of assisting them in deciding whether to trade in the PISCES company’s admitted PISCES shares”). They are concerned that additional questions would not be asked such that material information not otherwise included in the core disclosures would not be given to investors and that could result in losses to the investors and reputational damage for PISCES.

Core information disclosures

Noting the concerns they had previously expressed in May 2024 about the application of a modified MAR disclosure regime to a private market (see here for further information), the JWP think that the core disclosure requirements in the CP (summarised in Table 2 at paragraph 3.14 of the CP) “are overly prescriptive and extensive for a market of this type”. Expanding on this, the JWP point out that some of the requirements in fact go further than the equivalent requirements in the UK Prospectus Regulation, which in turn goes against the key principles of the PISCES platform.

To find a solution to this, the JWP refer back to the soft-form sweeper as they think that would allow the FCA to reduce the mandatory list of core disclosure requirements. In the JWP’s opinion, the overall effect of this would be that companies make more succinct and relevant disclosures to investors.

Fair disclosure

The JWP think that the suggested requirement for PISCES regulated information to be presented in an easily analysable, concise and comprehensible form is too subjective and so may not represent fair disclosure. Further the JWP is concerned that the operator portals could become full of out-of-date information, making it difficult for investors to find the information they need. The JWP recommend that PISCES companies are required to review and filter information available on the operator portals to ensure it is material and relevant, with an obligation to highlight where information is historic.

Legitimate omissions

The JWP are concerned that allowing PISCES companies to have “legitimate omissions” from the core information disclosure requirements may open up those companies up to legal challenge if they withhold information relevant to an investor’s decision. Further the JWP don’t think that such omissions are appropriate or necessary to protect the PISCES company’s, or its stakeholders’, interests.

To address the concerns of PISCES companies, the JWP note that access to information could be restricted in various ways. For example by making investor participation in trading events selective, putting information in a non-downloadable and non-printable format, withdrawing access to the information after the trading event and delaying the disclosure of sensitive information until a certain stage in the process.

Post-trade disclosures

The FCA suggest that PISCES operators require PISCES companies to disclose to those who were entitled to access a trading event details of the transactions by directors and by major shareholders (see paragraph 3.51 of the CP). Such disclosures would be made within a reasonable time after the trading event and would contain the same information as required for the core disclosures.

The JWP does not support the use of post-trade disclosures on the basis that the FCA’s objective to “give investors useful transparency about how directors in PISCES companies traded and whether a trading event affected who exercises control over the PISCES company” (see paragraph 3.52 of the CP) is already met by the core disclosure requirements. Their view is reinforced by the fact that only sophisticated investors are eligible to participate in the PISCES sandbox. As an alternative, the JWP suggest that the PISCES operators could introduce post-trade disclosure requirements on a voluntary basis as they see fit.

If you would like to discuss any of the points raised in the JWP’s Response or in connection with the PISCES sandbox, please speak to your Burges Salmon contact, Nick Graves (Head of the Corporate Department) or Charlotte Hamilton.