Stay informed with free updates
Simply sign up to the Financial & markets regulation myFT Digest — delivered directly to your inbox.
Here’s the FCA policy statement for today’s launch of the Trust-Me Börse, otherwise known as Pisces, and here’s the press release.
The Private Intermittent Securities and Capital Exchange System is an innovative new type of UK private-equity stock exchange where insider trading is fine so long as everyone signs a form to say they’re wealthy or sophisticated. As we wrote in December, market abuse laws will not apply.
And as its acronym foretold, the Pisces rule book has already been watered down.
Respondents to the December consultation complained that the information requested was “overly burdensome for private companies”, today’s policy document says. The FCA agreed. What this means in practice is that companies selling shares on Pisces can say almost nothing.
Per the doc:
We are narrowing the core disclosure information to a description of any significant changes in the financial position of the company. We are also removing disclosure on significant acquisitions or disposals and moving significant related party transactions into a separate standalone core disclosure information requirement as that it is more relevant for identifying potential conflicts of interest.
Pisces is an issuer-led market for secondary placings, not a regular exchange. A participating company is required to give core information only before opening a trading window (unless it finds a reason not to).
However, as expected, a main-market style “sweeper” requirement for companies to announce all price-sensitive information has been formally binned. What replaces it is the opposite.
There’s no longer a core requirement for companies to tell investors about significant litigation. Ditto any forward-looking information, including forecasts, business strategy and 12-month objectives. Ditto sustainability standards. And while the December consultation proposed that companies give details of any material contracts they choose to announce, it’s now sufficient for them to offer an “overview”.
Pisces-quoted companies don’t need to apply any specific accounting standards. They do have to say if they’ve been audited, but there’s no requirement to be audited.
There’s no longer a requirement for major shareholders (meaning >25 per cent) to announce dealings and, if directors change their mind about a transaction after the trading window is open, they don’t have to tell anyone either.
The consultation suggested that announcements from Pisces-quoted companies should be “easily analysable, concise and comprehensive”. Having drawn strong opposition, that idea’s been binned as well.
Pisces exchange operators take responsibility for making sure clients have self-certified as a sophisticated investor or a high-net-worth individual, as defined by existing rules and classifications.
With civil market abuse law not applied, the regulatory threshold of illegality is criminality. Market monitoring is left to participants by what the FCA calls an ask-model, which it purposely doesn’t define:
We do not intend to provide detailed guidance on how an ask-model should work in practice. PISCES operators should decide how to implement ask-model arrangements, considering our rules and guidance and the type of companies and investors on their market.
We are adjusting our guidance to make clear that PISCES operators’ arrangements do not need to require companies to respond to all information requests under an ask-model. However, an ask-model would not provide additional information as required by our rules if companies could refuse to respond to any or all legitimate information requests from investors.
The big idea here, people at the FCA say, is to interfere as little as possible with how private markets already work. Unlisted companies and their shareholders have always had to figure out how to get along without the safety net of securities regulation.
What Pisces does is widen the pool. All sorts of investors now get the chance to cosplay as private equity funds. It’s an unregulated buyer-meets-seller market that embraces information asymmetry while bypassing banks, advisers and intermediaries with long-term reputations to protect.
It all makes for an exciting rollback of securities regulation to pre-1980 standards that we imagine will appeal mostly to criminals, lower-league football club owners and, ultimately, lawyers.
Further reading:
— Can Pisces private market plan tip the scales in London’s favour? (FT Lex)
— Rachel Reeves’ private share trading plan criticised by executives (FT)