The FCA has now published its final rules for prospective operators of the new PISCES platforms (Private Intermittent Securities and Capital Exchange System), which will run for five years in a regulatory sandbox. While the FCA rules set out a framework for how PISCES platforms will work, much of the detail is left to operator discretion, so the rules that apply to participating companies on each PISCES are likely to vary between platforms. The LSE will publish the rules for its planned PISCES – the Private Securities Market – in the coming weeks/months. Ahead of that, we set out below a quick reminder of some of the key features of this new type of private securities market, where shares in private companies can be traded during intermittent trading events, with access to the full distribution infrastructure of the public markets through open or permissioned auctions.
Why establish a private securities market? Many companies are choosing to remain privately-held for longer. Without access to public markets, private companies can find it difficult to access new investors and to provide liquidity for early investors. PISCES will enable a participating company to facilitate intermittent trading of its shares on an organised, multilateral system without – crucially – becoming subject to the continuing disclosure obligations that characterise public markets (including UK MAR): PISCES participants will be required to make disclosure only in advance of trading windows. PISCES will also allow a private company to retain control over its shareholder base by deciding who can participate in each intermittent trading window, as well as setting floor and/or ceiling prices for trades.
How does this differ from including a secondary sale element in a funding round? The FCA and the LSE have highlighted a number of advantages of PISCES over a private process. The key ones are: access to a wide, but bespoke, pool of investors (made possible by exemptions to the public offer rules, financial promotions rules and stamp duty); cost, efficiency and repeatability (the LSE plans to use its existing market infrastructure, including CREST, to make transacting on PISCES frictionless); intermediate steps that would ease a future transition to a public market listing (including building the basis of systems and controls for public disclosure and having the right group of capital markets advisers around them).
Can PISCES be used to raise capital? No, PISCES platforms will support secondary trading only – i.e. sales by existing shareholders. PISCES is a new type of trading platform, and this limitation is a key difference from existing regulated markets and multilateral trading facilities (MTFs). It is worth noting that the new public offer and admissions to trading regime – expected to come into force in early 2026 – will introduce a further type of new platform that can be used by companies wishing to raise capital, the public offer platform (POP). In contrast to PISCES, POPs will be designed to facilitate new offers of shares but not secondary trading.
What types of company will be able to use PISCES? PISCES will be open to UK and international companies that are privately-held – companies with shares currently admitted to trading on a public market in the UK or elsewhere will not be eligible. In the UK, PISCES will be open to both private limited companies and PLCs. As UK company law does not otherwise permit private limited companies to offer shares to the public, the regulations establishing the PISCES sandbox modify s756 of the Companies Act 2006 to exempt PISCES participation from that prohibition. The changes also allow a private limited company using PISCES to investigate who holds an interest in its shares (modifying s793).
Can a PISCES be used for share buybacks? No, at least not initially – this is something that HMT has indicated it will keep under review following launch of the sandbox.
Will stamp duty / SDRT be payable on PISCES trades? No, PISCES transactions will be exempt from stamp duty and SDRT, aligning PISCES with the position on AIM.
Will the Takeover Code apply to PISCES companies? No, the Takeover Code will not apply to a company solely by virtue of its securities being admitted to trading on PISCES.
Will UK MAR apply to PISCES? No, the UK MAR civil market abuse regime will not apply directly to shares traded on a PISCES platform, meaning participating companies will not be subject to an ‘inside information’ disclosure obligation. PISCES will also have no civil or criminal insider dealing regime, and as such other investors may possess information relevant to an assessment of the price of PISCES shares that has not been disclosed on PISCES. The criminal offences of misleading statements and misleading impressions (section 89 and 90, Financial Services Act 2012) will, however, apply to PISCES, and an operator will be expected to notify the FCA if it suspects participating company disclosures could constitute misleading statements.
How will the financial promotions regime apply to PISCES? The regulations establishing the PISCES sandbox modify the financial promotions regime to create, broadly, a new exemption for any PISCES disclosure. This means the disclosures participating companies are required to make in advance of a trading window will be exempt from the financial promotion restriction, and will not need to be authorised. Disclosures must, however, include prominent prescribed risk warnings. For communications outside this new exemption, the regulations also clarify that shares on PISCES are considered to be ‘unlisted’, meaning that financial promotion exemptions for high-net worth individuals and self-certified sophisticated investors can be used.
What disclosures will a participating PISCES company have to make? No prospectus will be required to participate on a PISCES. Company disclosures will be required before a trading window opens, but they will not need to be made public – access can be restricted to investors eligible to participate in the trading window, with eligibility requirements set by the company. The FCA has prescribed core disclosures that must be included, aiming to replicate the information expectations of investors in a private company; operators must also include additional disclosure requirements in their rules. There are various options open to operators for this: for example, an operator could choose to provide investors with a Q&A forum to request further information from the company, though the company may not be under any obligation to respond to all requests (a so-called ‘ask-model’). Operator disclosure rules and arrangements must, taken as a whole, be appropriate for the efficient and effective functioning of their market. Company liability for core disclosures is based on a negligence standard, with the higher threshold of recklessness or dishonesty applicable to additional disclosures.
Who will be eligible to invest in PISCES shares? PISCES is intended as a wholesale market for institutional and professional investors, but certain categories of retail investor will also be able to participate (for example, self-certified and certified sophisticated investors, and high net worth individuals). PISCES will also allow the employees of a participating company or a company in its immediate group (and those personally providing consultancy or managerial services to any such company) to both buy and sell shares. As noted above, a PISCES company can choose to limit the investors able to purchase its shares in a trading event – any limitations must be necessary to protect the legitimate commercial interests of the company.
